Power Lunch - Long term outlook for investors, bitcoin crashing, the effect of rising rates. 6/13/22

Episode Date: June 13, 2022

CNBC’s Tyler Mathisen, Melissa Lee and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day���s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody. Welcome to Power Line. I'm Tyler Matheson, a big market sell-off on Wall Street right now. If you've been following us all day, you know that. The Dow is down about 600 points right now. That is on top of an 880 point loss on Friday and a slide Thursday. 48 hours from now, we will get the Fed's decision right at this hour. The big concern is a 50 basis point or a half-percentage point hike and whether that's enough to fight back blunt inflation. quarters of a point that might panic the market. So we're going to dig into the Fed's dilemma and all the reasons, Kelly, for this sell-off. And many there are, Tyler, thank you. Now, Tyler mentioned the Dow's big loss. It's the best performing major average today. The S&P down more than two and a half percent. It's down 20 percent from its highs. That's fair market territory. The NASDAQ down three and a half percent lower by 30 percent this year. And bond yields jumping. The 210 spread briefly inverting

earlier today for the first time since April, and the 10-year yield pushing 335 this hour. Meantime, crypto getting crushed, with Bitcoin dropping briefly below 23,000. That's a level not seen in a couple of years. Ether losing two-thirds of its value so far this year, $200 billion worth of market cap wiped out in crypto this weekend. Let's go to Bob Bassani for more on this market, sell-off, Bob. And we are essentially at that magical 20% level, which we decided decades ago would constitute a bare market. So if you're counting, we'd have to close today. Look at the S&P. 3837 is where we'd

have to close to make it official. That would be down 20 percent, and they count from the close. So January 3rd is the high, 20 percent down would be 38, 37. As you see, we're already very close to that, 3793 or so right now. I just want to show you two sectors that are being especially hard hit today on demand destruction concerns. One is the travel and leisure sector. We're seeing a lot of new lows today, like Norwegian cruise lines, MGM, American Airlines. These are big drops, 9, 10 percent already, and they've been down the last three or four days on top of that. The other group is energy stocks because what we've got here is a double whammy of concerns about demand destruction from inflation. And at the same time, we have lockdowns in China continuing Beijing, especially now, experiencing some issues.

And that's a very significant part of the global economy, obviously China there. So you see sectors that are exploration of production sectors like EOG and Devin. And then you have services companies like Schlumberzei and Halliburton all down rather noticeably. And these are actually off of their lows from earlier today. Dow new lows, we've got an awful lot of them, about 400 on the New York Stock Exchange. But there you see Microsoft down. Intel particularly dropped. Intel was $44 a few days ago.

Now look at that, $38. So you're talking about 15% or so declines in the last six, seven trading sessions. Goldman Sachs another one that was three twenty goldman just five days ago i did a story on that five or six days ago so you see another fifteen well not fifteen twelve or thirteen thirteen percent decline in Goldman three am also uh... fifty two week low number of the industrials down as well here's something remarkable you'll see at the open today

thirty to one declining to advancing stocks i i can go many many years without ever seeing that kind of uh... advanced decline in balance that we saw today even now only about three percent of the s m five hundred is in the green that's about thirteen fourteen maybe fifteen stocks out of five hundred stocks that are up here they are mcdonalds smucker obviously coca-cola uh... and uh... traveler in some of the insurance names doing a bit better everything is down today this is a broad decline he could see

how uh... as a p growth down three percent as a p value down almost three percent uh... as a p small cap uh... down about uh... three percent growth s m small cap value down about three percent you get the idea tyler This is a very broad takedown of the markets. Tyler. All right, Robert, thank you very much, Popizani.

Investors eagerly awaiting the Fed's next rate hike on Wednesday, and there's about a two-to-one chance that the central bank will increase interest rates by a half-percentage point. But the potential for a three-quarter point move is rising, and our next guest sees the potential for that three-quarter point hike as early as next month. Maybe not Wednesday, but maybe next month. We'll drill down on this, joining us with her take on what's next week. for the market is Anne Barry, founder of Thread and Needle Ventures. Let's be explicit here.

Do you think the possibility of a three-quarter point hike begins Wednesday, or is it, you know, six weeks later? Tyler, I think it's six weeks later. I think if the Fed goes there this week when the last sort of set of press conferences has suggested that the Fed wouldn't go there, it's going to look reactionary. But I think certainly in light of the inflation data, which has been uninspiring, I do think there's going to be pressure on the Fed to make that 75 basis point hike six weeks from now. So six weeks from now, not necessarily a day after tomorrow.

Let's go back. I don't know whether you happen to hear Howard Schultz of Starbucks at the top of the broadcast. But basically, he said there are things that are on a collision course. And one is the rising price of gasoline. In many parts of the, it's over $5 on average. In many parts of the country, it's above six, pressing on seven. Number two, you're certainly going to. to have higher interest rates and higher borrowing costs. Is there any way then if those conditions

persist and overall inflation takes a longer time to tame than we think that we avoid a consumer recession in this country? There are, I think, different ways to look at unpacking what a consumer led recession might mean, Tyler. I think, unfortunately, there are certain pockets of demographics who are going to feel this dynamic of high inflation and lowering real incomes a lot harder than others. So the lower income demographics in the United States, I think are in for a very difficult time, unfortunately. I think there are other pockets of the consumer base

who have still got strong balance sheets who benefited from rising asset prices over this COVID cycle who are going to be able to weather the storm. So I'm very concerned about the low-income demographics and a little bit less concerned about those in the higher-income ranges. And I think you're exactly right on that, not that it matters what I think here. But this leads you, by the way,

to one of the stocks that you have your eye on, and that is Walmart because of its ability to sell everything to everyone at affordable price points. Walmart's a really interesting one, because if you go back and look at history, these everyday low prices, retailers, have managed to do very well during recessions during downturns. And so Walmart, given its scale,

given its purchasing capability, positioned to whether the storm better than others. Tyler, though, this is more interesting for other reasons, though, Walmart has hiding inside it, increasingly, though, in plain sight, enormous data analytics capabilities. It's Walmart Connect platform is analyzing the shopping habits of over 100 million Americans every week who are interacting with the Walmart platform. And so we're seeing the move aggressively into financial services innovation, doing more in healthcare. So to me, this is an interesting combination of dividends that are available given the strong free cash flow. stability in light of the ability to serve different demographics, including those most impacted

effectively, but also the investment this company has consistently made in future growth. So I'm bullish on Walmart for lots of different reasons. And on the credit side, Anne, I mean, there have been such poor returns and so many deep sell-offs lately that where do you see value or is it, you know, is it the same kind of thing in the stock market right now? People might see value, but not really want to get in front of it. Kelly, credit's a really interesting one for me because I look back to the last cycle. And this was in 2008.

And I was helping to deploy at the time private credit, not immediately in the thick of the crisis. But in that 2010 onwards period, when the credit markets has somewhat stabilized, but there was to caution around deploying capital. A lot of private lenders made a lot of money being able to put capital to work behind very high quality businesses. And so when I look at that in the dynamic we have now,

and I look at some of the high yield or even other kinds of lower yield in credit ETA. like AAA, for example. I do think while we're holding cash, but we want to make sure we're getting some yield on it, I think that these credit ETFs can be an interesting place to play just while we wait right now. All right.

And specifically, which ones do you think, just the highest yield of the group, basically the safest areas? I'm sorry, the highest grade, not the highest yield. Well, that's exactly right. I'm looking at it on a risk-adjusted basis. When I look at something like AAA, which, as the ticker suggests,

is really focused on some of the highest quality portfolio, of credits managed by some of the big credit asset management managers. That is the kind of ETF that's looking at coming up to a three-ish percent yield by the time July rolls around, if not higher, if the Fed moves more aggressively. Those are the kinds of short-term positions I'd be looking to hold on to right now. All right. And thanks again for your time today for joining us. Thanks for having me on, Kelly.

And Barry, with today's sell-off more than 90 percent of the S&P is 10 percent or more from their highs. The same is true for 15 out of the 30 Dow stocks. Only four names in the NASDAQ 100 are not in a correction right now. Amid all this wreckage, where are the buys? Let's bring in Surat Sethi. He's managing partner and portfolio manager at DCLA and he's a CNBC contributor. Surratt, it's great to have you.

Do you, in a weird way, like investing at times like now? I mean, you know, it's what value guys are supposed to do, right? It is. But it's a combination. I mean, it's not a great feeling to see portfolios or the market down 20% of this time. and really where in the last three days we're down 7%. So the question now is when does this stop? And we all know timing is impossible to do.

But really, we've got a couple of key things going on this week. And it's hard to step into a market that's down 20% with really no short-term catalysts on the side. But having said that there are some stocks that if people have cash and they have an outlook, you know, three to five years out, I'm not saying six months because we don't know how things go. there are a couple of stocks that we like in this area. One is Bristol Myers. Bristol trades at 10 times earnings. It really does not correlate to what's going on, the economic cycle of the global world. And they have eight new products coming out in the next six months.

It's got a 3% dividend in yield. It's got a fabulous balance sheet. And I think this is something you can own. It's got bond-like return in terms of downside, but upside of an equity kicker. Let's talk a little bit about your views of what the Fed may or may not do. there was lots of sort of speculation in the last 10 days, let's say, that inflation may be peaking. I didn't see much in Friday's report that confirmed that, and the markets certainly seemed to be responding as though there's not much good news to be found in any of the inflation reports.

So what does the Fed do? You're absolutely right. I mean, Friday's report showed that inflation was not slowing. And a lot of us, including me, were looking for some signs. that the second derivative was going to be slower. I think the Fed's got to really step up now. I think the data is showing, and the Fed said they're data driven, 50 at least, and they might even go higher, and really until they bring down inflation. And part of that is bringing down demand. So, you know, demand destruction is occurring anyway with oil prices the way they are and consumer sentiment the

way it is, which is one of the lowest we've had in a long period. So I do think we're going to have a very strong Fed. The Fed is not going to be there to save the market, at least not. the near term. And if you're a long-term investor, these are going to be some great opportunities to kind of come in and buy some stocks that are going to be trading below fair value. We had so much liquidity pumped in the system. Fair value is hard to see. But with rates going up, especially the short-term rates, I think the Fed has to step on the pedal at this point. I'm not suggesting that Jay Powell is anything like Paul Volker, is that Volker 2.0 or whatever. But when you have interest rates presumably moving up significantly from where they are right now, the 10 year is, you know, where it is, it's 320 or I forget what it was.

335 earlier today. You have that. You have rising gas prices. You have rising prices for food. Is there any way we avoid a recession? Just because we have the recession, Tyler, does not mean that the stock market goes into, you know, 30, 40 percent spiral. think you can definitely get a slowdown, and that's what the Fed is trying to do, avoid the stagflation slowdown. And with a recession, remember, the market looks at 12 to 18 months. I mean,

in 2020, when the market was at its worst, all of a sudden it took off, even though we didn't have a vaccine. In 2008, you know, the market started responding back in 2009, we were the biggest part of the recession. So we can be in this recession, which is probably where we're going to be, if we're not in one already. But it's not necessarily bad for the market. No, it's not necessarily bad. I think people need to remember that, a hammered home. The idea is that a recession may be bad for the economy. It may be bad for the people that Anne was just referring to earlier,

the people at the lower end of the income spectrum. But it does not necessarily mean bad news for the market. In fact, it might suggest as the market looks ahead, a turn. Right. Absolutely. And I would add to that, when the market started coming down, things were really good in the economy. So we can be at a stage in the economy, when you are in a recession and the market can turn around.

It can look for catalysts going forward. I don't know what they are. We never know what they are until 18 to 24 months afterwards. But at this point, you know, it does not make sense to sell your stocks unless you just can't sleep at night. But if you are within your allocation and you're meeting your objectives, you know, and if you have cash on the side, you're going to get opportunities like days like today and probably down for a few more weeks where they're going to be some really great companies that are going to be on sale for Firesight. sales that you can buy and you'll be happy to for the next few years. All right, Surat, thank you.

Always good to see you. Surat Setti. We appreciate it. Thank you. And coming up, every sector, every single sector lower today. 97% of the S&P 500 stocks are down at one point. All of them were down except for Coke. But consumer discretionary is getting hit the hardest. Some of the higher end retail names like PVH, Tapestry, Ralph Lauren.

Is there even more pain ahead for these names? and the 10-year yield jumping today to the highest level since 2011. We are two days away from the next Fed meeting. Are the markets expecting the Fed now to hike by three-quarters of a point? Is that what's needed to fight inflation? All that and more are coming up. Stay with us. Welcome back to Power Lunch, everybody.

Retail definitely under pressure along with the rest of the market today. Two major ETFs tracking the space down about 3%. All righty, all but two names in the XRT ETS. are down more than 10% from their highs, and every name, every single one in the RTH is down more than 10% from its highs. Our next guest has been cautious on retail for a while, and he sees more pain ahead. Ike Borshaw is managing director and senior retail analyst Wells Fargo Securities. Ike, welcome. Is demand slowing so sufficiently, so dramatically that virtually all retailers are going to, are going to

to feel the pinch. Hey, Tyler. Yeah. So demand is slowing. I wouldn't say it's, it's anything super material, but I think the problem is, is that demand is slowing at a time when companies started to get a little bit more confident with how they were ordering because of supply chain bottlenecks trying to get ahead of the issues in supply chain.

So now what's ended up happening in our view is the inventory is really starting to build at a time when the demand is slowing. So it's less about just the revenue. And it's more about what those margins are going to do when the revenue starts to come in a little bit worse, but you're left with a lot more inventory because the plan was maybe, you know, four or five, six hundred basis points better on sales. So who is best and worst positioned, Ike, in terms of managing that inventory? Yeah, Kelly, it's a good question. I would say when we look at the group in totality, I would say the global brands are in a better. position to kind of manage through this. I think the domestic soft lines retailers are in the

tough spot. You know, on the apparel side specifically, we're already seeing the markdown cadence accelerate. And I think the lower end you go, not really surprisingly, you're seeing the much more pressure there. So think about names like Old Navy, Burlington, Ross stores. So I think, I just think that it's kind of the domino effect. Apparel is a really competitive category. I feel like we've forgotten about that the last two years, because it's about. how clean the space has been, but this is going to have a knock on effect. I think margins are going to get much worse as we move through the year. So if I'm hearing you right, you would lean away from broadline retailers

and maybe go to the brand owners like Tapestry or Capri Holdings? Absolutely, brands over boxes right now from perspective. Brands over boxes, okay, good. Brands over boxes for sure. And, you know, within that, I'd say getting away from a, apparel right now. I think apparel's tough. So the two brands that are two of our favorite ideas that you mentioned, Tapestry and Capri, these are accessible luxury, handbag accessory brands, you know, Michael Coors, Versace, Coach. They have bigger margins. They're more global.

It's a less competitive space. And the pricing and a U.R dynamics, there are going to be much easier to contend with, we believe. So you mentioned your top picks, Tapestry, Capri, Bath and Body Works. But what happens if the consumer environment remains wobbly? Then this continues. I mean, remember, we cover consumer discretionary. So if we do go into a recession and things get worse, I don't think any of these stocks are going to be particularly great just because of the kind of the discretionary nature.

But the issue that we see in terms of the stocks, we're too early. You know, typical negative provision cycles during recessions last about 12 to 15. months. You know, estimates are coming down now in our space, which is great, but it's been one or two months. Revenue estimates have come down 1%, just for context. Back in 08, revenue estimates came down 15%. So I just think we're early. I think numbers are going to keep coming down. I know valuations are cheap, but I don't really think those multiples truly capture what the real APS power could end up being. All right. Ike, thanks for your time today. We'll leave it there. We appreciate it. Thank you. Ike Borchow.

I like that. Good catchphrase. Further ahead, Wednesday's Fed meeting could have market altering implications. Maybe it already is altering the markets. Will they raise rates faster than plan to fight inflation or not? We'll dig into that. Up next, Tesla down along with the other EV makers and the whole market today. Names in this group are down as much as 70% this year. We'll have more on these moves next.

As we go to break, take a look at the sector falling the most from its highs. It's consumer discretionary. We were just talking about some of it. down nearly 40%. Some of the names within that center sector, travel and entertainment. Yeah, I mean, whoa, is right. Carnival down 50% year-to-date. It's less than a $10 stock. It's only the first time that's happened since the pandemic. We're back after this. All right, welcome back to Power Lunch, everybody. Take a check at the EV names for today. Huge declines across the board. The vehicle makers like Tesla down 6%.

Roughly triple the Dow. Rivian down 6%. Again, roughly triple. the Dow between six and temperatures. And look at Neo. Just take the eye out of there. You got no. And that's what's happening today. Down 11 and a quarter percent. Evercore points out a slowdown in clean energy initiatives from the White House. That is impacting this group. Plus, the EV startup last mile solutions. Well, they've come to the last mile filing for bankruptcy, chapter 7, planning to liquidate one year, one year after going public via a SPAC. Let's go to Christina Parts of Nevelas now for the CNBC News Update Christina. Thank you, Tyler.

Let's move on to today's January 6th hearing, clips of former attorney general Bill Barr speaking with the panel's investigators were played. Barr recounted how he had repeatedly told then President Trump that his claims of voter fraud were ridiculous, wasn't it? I was somewhat demoralized because I thought, boy, if he really believes this stuff, he has, you know, lost contact with, with, he's become detached from reality if he really believes this stuff. On the other hand, you know, when I went into this and would, you know, tell him how crazy some of these allegations were. There was never, there was never an indication of interest in what the actual facts were. No children were hurt today when police fatally shot a man with.

a gun at a summer sports camp outside Dallas. Right now, authorities aren't seeing anything about who the man was or why he was there. An actor Kevin Spacey is scheduled to appear in a London courtroom next week after being formally charged with sexual offenses against three men between 2005 and 2008 and in 2013. Kelly, back on you. All right, Christina, thank you very much. Still ahead on power lunch, the $5 dilemma. With the national average for gasoline at that price, When will consumers start sitting out of the economy and stop spending the message from the consumer stocks, not reassuring? Plus, bailing on Bitcoin, $200 billion wiped out of the crypto market this weekend. Is there still more pain ahead?

We're back after this. All right, folks, we've got 90 minutes or so left in the trading day. The Dow is down 720 points. Let's get you caught up on the markets with stocks, bonds, commodities, a look at $5 gas as the new national average. Let's begin with stocks, still lower on the day, but off the lowest levels. The Dow had been down about 900, 899 to be precise at the low of the day. Big tech down today. And the one-week losses for some of these names are huge.

Look at Apple, down about 9% on the week. Amazon, down about 16%. Meta, down about 14%. Every area of travel getting hit hard. The booking companies, the hotels, the airlines, this, and the cruisers. Look at poor Royal. Can't catch a break down 9% there, but booking holdings down 5, high at down 6 and thereabouts. Not much is higher today, but the few stocks that are are safety names, generally food and insurance. Food, Coca-Cola, McDonald's, doing pretty well

today, and progressive. Have you seen their commercials? Have you seen any of those progressive commercials? Hey, they're really, okay, turning now to the bond market, a big jump in the 10-year yield today, getting as high as 3.35%. That is the highest since 2011. And there you see it, right there, 3.35%. The two-year jumping even more briefly inverting, in other words, the yield on the two-year was higher than the yield on the 10-year. That's usually not a good sign for the economy, but it was brief. Let's give you a check on gold. It is down 2% today, even as inflation weighs on the market. There you see it. Two and a half percent down at 18, 20 an ounce. The problem for gold, basically, is that the dollar is strengthening as steeper interest rate hikes are expected.

That pulls money into the dollar out of the gold market. One thing that is moving higher today, that would be oil. And it's bringing gas prices with us. Pippa Stevens has those details for us. Hey, Pippa. Hey, Tyler, not welcome news for consumers with gas prices at record highs. Now, starting with oil, it did spend the morning in negative territory before staging a reversal around noon, although just now here dipping back into negative territory.

And this choppy trade is thanks to COVID cases in Beijing rising against global supplies remaining tight. WTI is flat here right around 1 2067. That follows seven straight positive weeks, brand crude also flat around 122. Now looking at energy stocks, they're not escaping today's broad. broad-based selling. The sector is one of the worst performers down more than 4%. EOG, Halliburton, and APA among the day's biggest losers. And we did hit a milestone four gas prices over the weekends with a national average topping $5 per gallon for the first time ever, according to AAA. Prices are up 58 cents in the last month. Now, it does vary widely by state. Georgia has the lowest

average at $4.48 after the state's gas tax was suspended. California, Tyler, has the highest at $6.43. Back to you. All right, Pippa, thank you very much. For more on oil prices, let's bring in Denton Cinque Guana.

He's Chief O'Rana, excuse me, chief oil analyst at the Oil Price Information Service. Denton, welcome. Good to have you with us. Can you take us through some of the fundamentals of the oil and gas, gasoline, markets that you're watching that add up to the prices we're seeing.

Sure. Well, right now, refineries are in the United States are operating at a very high rate, but inventories are still very low. So right now we have the supply and demand imbalance. And it's really kind of been trending this way over the last several months, which really simply has gotten us to these levels that we are at 501 right now, 20 states and the District of Columbia being all averaging over $5. So it's been pretty ugly. from a consumer standpoint. And it's not as if another refinery is going to come online here in the next few weeks to bail us out. You've got Russian oil leaving the international markets, or at least partly so.

As I understand it, you've also got a situation where refiners are incentivized by higher prices to concentrate on making other distillates besides gasoline, in other words, diesel and jet fuel, right? because they have higher margins. 100% correct. And right now your yields should be tilted more towards us. Now, you can't go 100% diesel and 0% gasoline. You can tweak it a little bit here and there, maybe a couple percentage points. But right now, the market is telling refiners, hey, we need more diesel.

And quite frankly, I tend to agree with that because right now diesel supplies as tight as gasoline is, diesel is even tighter. It's pretty scary as far as diesel is concerned. So what do you expect over the next, say, three to six months? We don't know, obviously, what the hurricane season might bring and whether it might impact or shut down some rigs or some refineries. We don't know whether demand destruction is going to take place. But what's your best guess on where we will sit toward the fall and winter? Well, it's funny you mentioned hurricane season because it just started. And that's the last thing we need right now, no matter, you know, whenever.

But over the next several months, I think, you know, we are starting to. to see some of that demand destruction, some of the data we get from retail stations throughout the country is starting to show a little bit of fading in gasoline and same store sales of gasoline. We're also hearing anecdotally, and this goes back about a month or two ago, when premium gasoline reached $5 a gallon, those drivers that strictly use premium, they were downgrading to regular. So if they're downgrading to regular at $5, you know, I think we're going to start to see some behavioral changes here at $5 a gallon as well. So with that demand destruction, we might level off here. And again, the way, yes, crude oil did move higher today, but gasoline futures have

been dropping. They've dropped about 23 cents over the past couple of days. So we might see prices level off here, at least temporarily. But again, July, August, all bets are off. Well, that would be great news at least in the near term. And then we'll see what happens, Denton. I guess what should we watch for on the jet fuel and diesel aspects of this, which, as we mentioned earlier, are wreaking havoc on some of the airline stocks and other exposed parts of the market? Well, Kelly, you're absolutely right. You know, when it comes to diesel in particular, everything you buy in the grocery store and the big box retailers, how does it get there? Gets there by a truck. Those costs are going to be passed on to the consumers.

And at some point, consumers are going to say, okay, enough's enough. I got to cut back on my buying, on my spending, et cetera. And then we're going to see that shop when it comes to airline tickets, you know, if we want to go maybe to Europe. I mean, the dollar's really strong right now. So you've got a pretty good exchange rate. But that's going to get it beaten up by a plane ticket going to Europe or even Disney World, for example. Well, you know, you're living my life here, Denton, because I'm thinking about going to Europe this summer. And the fairs are crazy. And I have a big old honkin car that says put premium in me.

And I say what, you know, I say no, I'm going to go to plus or regular. That's it. It's just good. Denton Cinquegrina. Yeah. Tyler, that's strike one and two. Me and my melon head friends have a trip plan to Scotland, you know, next year. So hopefully airline tickets, to go play golf, hopefully airline tickets come down by then.

So hopefully, you know, things cool off. And again, I think we will. Not necessarily in the United States so much, but globally, we're going to see a new refinery come online in West Africa before the end of the year. And more refining capacity coming online in the Middle East and Asia between now and 2025, which will help obviously bring more supply to the market. It's not going to happen tomorrow, obviously. But again, it's coming, and I think 2022 may end up being a little bit of a gap year, if you will.

All right. Well, enjoy Scotland. It's great place to go. Denton Cinquegrana. Thank you, man. Thanks, guys. What do they say happens, by the way, if you put in plus instead of premium? I think the argument is it's not as good for the engine, number one,

and that actually you get a little bit better mileage if you use the higher octane gasoline. So you may be, I may be, as my mother used to say, cutting off my nose to bite my face. I think it's going to be a national experiment in figuring out what happens when the people trade down. Coming up, we do have more on this market sell-off with stocks down, bond yield soaring. What does it all mean for housing? Wait, so you see the mortgage rates. As we head to break throughout the month of June, we are celebrating Pride Month. Here is Golden State Warriors, former president, Rick Welts.

I just think June, you know, for the LGBTQ community, is just a time to reflect on the journey that we've been on, take stock of where we are right now, and think about the future. So I'm proud of the people who are out there telling their stories in all walks of life to really help people understand that we're part of the fabric of this country.

Welcome back to Power Lunch, everybody. Mortgage rates continue to make new headlines. They are soaring up half a point in just the last couple of days. Here's the 30-year fixed mortgage. The white number top left of your screen, 6.13% is the current rate today. Let's just let that sink in for a bit. It is basically doubled just this year. Our next guest says these higher mortgage rates will cool the housing market this spring, but demand will pick up again in the fall. Joining us now is Danielle Hale, Chief Economist at Realtor.com. to see you again. And let's just start with why you expect a man to pick up in the fall. Yeah, I think it's going to take some time for consumers to get used to these higher rates. But eventually, as the Fed gets to a point where we're starting to make headway against inflation, they can top out on rate increases.

I do expect we're going to see mortgage rates stabilize. And that gives consumers the opportunity to adapt. We're going to see more homes available for sale. And that's going to give consumers options like they haven't seen over the last couple years. And I think we're going to see home sales pick up a bit as a result. Ari, what are you seeing you guys have a lot of good kind of high frequency daily, weekly data? What are you seeing in terms of turnover times, the numbers of listings? What's happening out there with this spike that we're seeing in rates? Yeah, so our weekly data shows we're starting to see more homes available for sale. And there are two reasons for that.

One is because we've got more homeowners coming on to the market, putting their homes up for sale more so than we saw it this time last year. The other component is that we have seen the sales pace slow down a bit, and so buyers are being a little bit choosier. We haven't yet seen homes sit on the market for longer because a lot of what's coming up is brand new because we have all those new sellers coming into the market, but buyers do seem to be a bit choosier. What's most interesting to me is that even though we have more homes on the market, we haven't seen asking prices slow down yet. They're still growing at double-digit pace.

In other data, we have seen sales prices slow down a bit. But again, still growing at double-digit base. I think it's going to be a while. We have to have more homes for sale for a longer period of time before we see an impact on those asking prices. You say we have more homes coming on the market for sale. Why do you think that is? Is it because the people who are putting those houses on the market

are aware that house prices are peaking if they haven't already peaked and they want to get that top tick? Why are they coming out now? You know, I don't know if people think that home prices have actually peaked, but they do know that home prices are high. And it's a very good time for sellers. And so some of them are trying to take advantage of that market. But remember that the vast majority of sellers are also buyers. So even if they get top dollar for their home on their sale, they're having to get time with that top dollar on the next home purchase. So I don't think it necessarily drives that many people to get off the fence and get in time. That's what I want to ask you. I mean, I think one of the things you said is we expect more, to come on the market through the summer end of the fall.

And I question that because I'm a homeowner. And if I'm a homeowner, I have to, and I want to sell, I'm going to be going to sell at a high price, but I'm going to have to go buy at a high price and at a much higher interest rate. So the disincentive for me to put my house on the market has grown a lot in the last six months. Yes, if you still got a mortgage, then the mortgage rate is a consideration. But remember, up to a third of homeowners don't own their home with a mortgage. And so for those homeowners, the additional homes for sale create other options. And you've also got to remember, too, homeowners and workers alike are enjoying more flexibility than they have ever before. And so if you sell in one market that's ultra competitive where you're getting top dollar and relocate to a more affordable market, that can still make sense and you can still end up paying less for your

housing even though you're paying top dollar in both markets in essence. All right. Some strategies to think about. Yeah. I mean, it makes sense. If I move from northern New Jersey and I move to Charlotte or I move to Atlanta or a more moderately priced market, my money would go farther and I might, and certainly my property taxes would be lower.

I'll tell you that. Danielle Hale, realtor.com. Appreciate it. All right. More on the volatility in the market ahead of the Fed's decision. and what Powell's next move might be and how you should navigate the markets and find opportunity.

Power lunch is back with the Dow down about 2%. It doesn't feel as bad as it did earlier today, but it still hurts. We've got stocks taking a leg lower. The S&P into bare market territory now after these declines over the past couple of days, including today. Investors anxiously awaiting

to see what the Fed will do this week. Last month, Dan Greenhouse, strategists with Solis alternative asset management told us the Fed should go three quarters of a point higher on interest rates. Mr. Greenhouse joins us now. Dan, how are you? Good to see you. Good to see you, sir. Are you feeling like your prediction of a month ago is coming true? Well, I wouldn't say it was a prediction so much as it was a discussion I was having at the time about whether the Fed should have taken, as they apparently did to some degree, taking 75 basis points off the table. And my point at the time was that I don't think they should have taken it off the

table on the idea that perhaps the next inflation report might be hotter than expected. Now, indeed, that's come to pass. And indeed, I do think that they will, they should raise 75 basis points at the next meeting. But I would stop short of calling it a prediction. But I'll take it. Yeah. I mean, I remember the moment well because the question came from our own Steve Leesman about 75 basis points. In retrospect, was that a mistake? Was that a mistake? mistake on Powell's part to fundamentally take it off the table. And now he may have to, he may choose to eat his words. Yeah, I do think it's a mistake, although I will say, I think the Fed is making a number of mistakes here and has made a number of mistakes. So in that sense, it's completely in

character. But clearly I don't think they should have taken it off the table. And then I do think that they should raise rates by seven and by days. Tell us what those other mistakes are that they are making or have made. I mean, obviously they were slow to awaken to the persistence of inflation. So we know that. Yeah, but I think they can be excused because a lot of people early on were on the transitory train, myself included. It conceptually made sense and mathematically it made sense as well. But I think they were exceedingly slow to recognize the shift in the underlying economy, to recognize the degree to which fiscal stimulus was being supplied, and the degree to which they should have retracted monetary policy and response, and the result of which is the housing,

I don't want to use the word bubble, but the housing market in which we currently find ourselves, I find it one of the most egregious mistakes they've made in their entire history, that up until two or three months ago, they were still buying mortgage-backed securities. Now, I know there is some reluctance inside the Fed to articulate a difference between treasuries and mortgages for fear of seeing as being supplying support to the housing market specifically. So they tend to treat mortgages and treasuries the same. But the rest of us here on Earth don't view it that way. And the idea that they would be buying mortgages in February and March is just an atrocious

decision at the time, let alone in retrospect. What is the, a lot of this, Dan, has been about what you think, you know, they might do or what they didn't do. So what do you think they should do now? Yeah. So for starters, they have to play catch-up. And that's a view articulated in a number of quarters, Larry Summers, Muhammad Al-Alarian and the like.

And I've been on that, of that view for some time now. I also do want to say that I have some sympathy for the Fed in the sense that there's really only so much they can do here. Sure, there's a demand problem. Probably not be the right word. But sure, there is excessive demand and they can do their part to curb it. But the energy part of the story is something over which the Fed has almost no effect whatsoever. So as we know, gasoline prices are $5 a gallon.

They're well over six in certain parts of, in certain over six in California where a large portion of the driving gets done. But I think we tend to put too much weight on the so-called core CPI, which excludes food and energy, the idea being that energy doesn't have an impact on that core number, and that's ridiculous.

Well, it's ridiculous. Of course it is. Yeah. Yes, I mean. Because if you, please, Tyler, go. No, I mean, if you take out the two things that are costing me the most, Well, I mean, it's like if I take out my strikeouts, I'm a much better ball player, you know?

No, that's right. Rob Deere would be happy to hear you say that. But what I would also add is the idea that somehow energy is not included in that core CPI is delicious as well. For instance, you have things like airlines, airline fares, which are up 40% year of a year. Talk to any airline analyst, and they'll tell you that's exclusively because of work. Talk to any consumer like me, Dan. They are way up there. Dan, we have to leave it there for time reasons.

We appreciate your insights today. Dan Greenhouse. Thank you, sir. 48 hours and find out what they do. Coming up, it's not just crypto collapsing. Today, it's the whole ecosystem. We'll break down the biggest movers right after this. All right, folks, welcome back to power launch. We've got about an hour left in what has been just a miserable day for the markets.

But those losses, 2, 3% for the major averages are nothing compared with what's happening in crypto. Bitcoin down 14%. Ether down 16%. Kate Rooney's following us. Following it, tell us more on what happened in this crypto crush, Kate. Hey, Tyler, a lot going on in crypto-shaking investor confidence right now. As for Bitcoin prices, analysts I'm talking to still say that Fed policy is the main drag on the entire asset class. Roughly $200 billion was wiped off of crypto's market cap over the weekend.

The total value of the crypto market fell below a trillion dollars. That's about a third of what it was worth at the high. And there are some industry-specific headlines contributing to that. One of the biggest crypto lenders, Celsius, saying last night that it's freezing customer withdrawals and transfers. There had been some speculation that it was having solvency issues. The firm, for some contacts, had $11.8 billion in deposits and 2 million customers as of mid-May. A bulk of those Celsius customers are retail investors.

They were brought in by an 18 percent yield that this company offers for just depositing. crypto and holding it there. There was not a lot of transparency on the back end. On how they could offer that, we do know that they lend customer money out to hedge funds as one way to get yield there. This morning, one of the world's largest exchanges, Binance, also pausing Bitcoin withdrawals. That has since been fixed, but still some questions swirling around why that happened in the first place. And we've seen more layoffs today happening in crypto as a result of this price crash. BlockFi, that's a competitor to Celsius, cutting 20% of employees, earlier today. All of this is hitting the crypto-related stocks as well. Coinbase down double

digits, micro strategy down 25% at this point. Back to you guys. All right, Kate, thank you very much. Kate. Hooney. Kind of hard to end it on a bright note at this point. Well, maybe if Celsius converted to Fahrenheit, it wouldn't be as bad. All right, thanks for watching Power Lunch, everybody.