Power Lunch - Markets in turmoil, the dollar threat and an earnings recession ahead? 9/23/22

Episode Date: September 23, 2022

The Dow breaks below 30,000 to a new low for the year, falling into bear market territory. As stocks fall, the dollar strengthens, hitting its highest level since 2002. We’ll speak to market experts about the stocks to buy on the pullback, the names to avoid and whether an earnings recession is imminent. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, a sell-off on Wall Street, the Dow, breaking below 30,000, now down more than 20% since it's January high. This hour, a top strategist, tells us what she's watching and what she's buying. We'll discuss the threat of the stronger dollar, whether an earnings recession is ahead, and why opportunity can be found in some of the biggest laggers that we've seen this week. But first, tie to you, a check on where we stand, two hours left in trade. All right, yeah, the end of trade couldn't come soon enough. if you're long the market. The Dow and the S&P 500 dipping below their June closing lows.

The Dow on track now for its lowest close since November of 2020, almost two years ago. There you see the S&P 500, 3674. The June low was, I think, 3666. We got below that. We're back above it now. Nevertheless, a 2% decline there. And the NASDAQ, well, it's down 2.5%. 10815, dipping below 1,000.

To your note, look at that. 4.2 percent, the two-year yield highest level since October 20.7 in today's session. Oil, well, oil, been on a downward slide for months now, below $80 a barrel for the first time since early January, continuing to slide there at 78.42. That's pressuring the energy stocks. That is the worst performing sector today. And let's get to Bob Pisani, who's tracking today's sell-off. Hey, Bob. And Tyler, we are off of the lows, but just barely. Again, I want to show you the S&P 500, and Tyler's right, 3666. He's got the number right in his head. We did violate that, but remember, that's the close. We have to go below that

to close at a new low. The intraday low was 3636. That was on June 17th. We did not drop below 3636 on an intraday basis today. Tyler's got his finger on the pulse with oil because it's energy and commodity stocks that are really weak today. So oil at 78 means oil stocks, big trouble. Look at that. You very rarely see a double-digit decline in Halliburton on an intraday basis. That's very, very unusual. Remember, oil stocks, oil proxies for global growth. The same with the metals and mining company. London was a disaster today because a lot of the big metal mining companies, Glencore, for example, that trades over in Europe. And that closed down 6% over there. Rio Tinto, Freeport-McRan. They trade here. But you see these, again,

Proxies for global growth to the downside. Big Cap Tech, a lot of new lows today, and not Apple, but Microsoft New Low, AMD, New Low, Invita, that's a new low, 123, yes, should be Salesforce 2, New Low right there. We're starting to see new lows materialized financials, which we did not see earlier in the week. A couple of bigger ones, Citigroup, some of the large, I call them super regional banks like U.S. Bank Corp, Capital One, there's a card company, Key Corp, another super regional bank. These are all 52-week lows. So what does the market look like?

Well, folks, we are dramatically oversold. I don't often bring up technical indicators, but momentum extremely oversold. You look at the relative strength indicator, RSI. This is a two-week reading on the market. It's very, very oversold. The advanced decline line, 10 to 1 declining to advancing stocks. That's very rarely happens. New lows, look at that almost 1,000.

Well, there's about 2,400 stocks on the New York Stock Exchange. So we're talking about 40% of the NYSE at new lows. How about the percentage of stocks that are above their 200-day moving average? Only 12% of the S&P, 3% of the S&P above their 50-day moving average. Those are very extreme readings, and usually indicates some kind of bottom. Heaven knows if that is or not. What's changed since we've talked about that? Well, utilities are up and consumer discretionary is up, but here you see the big difference here.

Remember those materials and energies? I said they're proxies for growth. They're the ones that are down the most since the June 16th low that we hit, along with semiconductors, also somewhat proxies for global growth. Seema, back to you. Bob, thank you. With the S&P 500 breaching that June low, the index is closing in on Bank of America's street low, year-end target of 3,600. And the drought down, they say, is entirely the result of, the rise in yields with much more volatility expected over the next few months.

Let's bring in B of B of A Security's Head of U.S. Equity and Quantitative Strategy. Savita, Subramaniam. Savita, good to have you on. I've read your note. Why do you think stocks can fall further from here? Well, hi, Seema. It's great to be on. So I think, you know, one of the things that we're looking for is a real sign of

capitulation from a sentiment basis. And while everybody says, you know, the world is incredibly bearish, it's time to get bullish. When the world is actually incredibly bearish, nobody is saying the world is incredibly bearish. It's time to get bullish. Everybody is under their death. We just some work looking at kind of what it takes to get to a market bottom in the prior, you know, 10 bear markets that we've seen for the S&P 500 going back over, you know, 50 or 60 years. And I think what's interesting is that a few things seem like they really need to happen in order to get more constructive on the overall index. First, what we've seen historically is that before the market bottom, the Fed typically

cuts interest rates. Now, that seems like it's a ways away. In fact, our economists are forecasting that that happens maybe, you know, third quarter of next year. So that makes me worry. But I do think it might be different this time. You know, obviously what's happened in terms of Fed easing has been unprecedented. So maybe it doesn't work the same way in this fair market. I think the other factor that we need to see resolve itself is just earning. And when you look at what analysts are forecasting for next year, they're forecasting above-trend earnings growth. They're forecasting peak margin. This is in an environment where companies are in the process of, you know, shifting supply chains, spending tap-backs, lots of inflation.

companies are losing pricing power. So, Seema, I mean, I just see this as a market where at $3,600, you start to look for really interesting opportunities. We're basically there. I think, you know, there are things to buy, but there are still a lot of areas to avoid. 3,600, that's when you would be a buyer. What exactly where would you be pointing investors to? As Bopasani was pointing out, utilities and consumer discretionary, the two sectors higher from the June 16th low. Yeah, I mean, neither of those are, we're a big fan of.

I mean, utilities is basically a bond. So if long rates rise, I think that that's a sector that typically gets sold. It's also a sector that's laden with debt. And I think that's a risk in an environment where yields have monstrously increased. I think, you know, consumer discretionary are underway. And I think that's a sector where you really need to look hard at what the expectations are for these stocks versus what's actually happening. And labor has been sticky and high in terms of inflation. Consumer discretionary, these are some of the most labor-intensive stocks in the S&P 500,

and they tend to get hurt by labor inflation. And what we're seeing is that while pricing power is starting to decline for some of these companies, labor is still remaining relatively high. So I think that's what we would watch in order to get more constructive, It's a meaningful drop in wage pressure. I think, you know, where we see the opportunities, I mean, I would just keep repeating to myself, cash is king. I mean, you mentioned this a second ago.

You know, yields are close to 4%. That is a very competitive return on an asset class. So where do you go within the S&P 500 to get that cash? You look for free cash flow yields. And where we're seeing free cash flow yield is still in energy. It's in health care. It's in parts of industrial. But I still think there are a lot of opportunities to load up on high free cash flow.

I would just screen the market on free cash flow to enterprise value and look for the stuff that's at the top of that list. Let me get you to elaborate, Savita, if I might, on earnings. You say, because they're a key driver of stock prices. And if you've got corporate earnings on the S&P going up in 2023 by analysts' consensus or agreement, not to say they're right, by 8%. Doesn't that put a very substantial floor under stock prices? Or do you just question the idea that companies are going to be able to grow earnings 8% over the next year? And maybe those earnings are going to decline by 8%.

Yes, that's exactly right. So our forecast is actually a peak to trust 10% decline in earning. What percent? 10% did you say? 10%. 10%. Okay. And that's not as bad as a typical recession.

So we're actually building in sort of a, you know, kind of a milder recession. We're building in an environment where isolation abates somewhat, but not entirely. But, you know, demand starts to slow. And I think that's the risk when you. look at earnings forecasts is that some of the most labor-intensive sectors that are driven by goods demand rather than services demand have the highest forecast by consensus analysts. And I think that's the area where you might see some risks. And we've already seen those stocks sell off, but I think there's more to go because they're

still not that inexpensive. So I think that earnings expectations are just unrealistic at this point. We had, you know, a lot of stimulus that drove the recovery. That stimulus is running out. Consumers are fine, but they're not going to buy as much stuff over the next 12 to 24 months as they did when they were stuck at home, you know, getting a lot of stimulus and with no other options to spend their money. I think energy is a sector we want to think twice about. I know it's the worst performer today, but I would buy it.

We're our long energy. I think there is a floor on oil because of these supply constraints from various avenues. But I think that that's an area that still benefits from where consumers are spending their money, which is services. They're flying. They're driving. They're doing stuff. All right.

We've got to leave it there. Savita, fascinating conversation. And thank you for your sort of out of the mainstream call on corporate profits. I think that's a really one, really a thing to remember. Savita Subramamian of B of A. Thank you very much. You got it. The route isn't just happening here. Stocks and bonds are selling off worldwide. The yield on the two-year hitting a new 15-year high, the 10-year yield highest level since 2011.

Let's bring in James Bianco, President Bianco Research. Jim, always good to see you. To see you. I think anywhere you look, people are stunned by how much interest rates have risen this year. Are you? Yes, and I came into the year bearish on the bond market, but yet the returns that you've seen in the bond market are the worst in recorded history. This is going to go down as the worst year ever to be a bond investor. And it's not getting any better.

What you saw today in the UK was the biggest rise in their five-year note in history. It was up 51 basis points, a half a percent, one instrument in one day, which, is an extraordinary move. You're seeing interest rates all around the world moving up higher, and it has just been something to, sight to behold, even for a bond bear like me, to watch these kind of moves that we've seen in the bond market. You know, we heard about an hour or so ago, Jeremy Siegel, the esteemed professor from Wharton, very critical, as animatedly as I think I've ever seen him, very critical of the Fed, and basically saying they're going too high, too fast, and indicating that they're going to stay too long

without giving any sense that, you know, they'll be sensitive to the idea of taking their foot off the break if they begin to see a slowing economy, which he opines we're already beginning to see in some areas, most especially housing. What do you think? You know, I think that that's the problem. Why are rates continuing to soar?

Because nothing is breaking yet. You had Savita on a minute ago, and she was talking about the consensus on earnings is 8% for next year. No one really thinks anything's breaking. Initial claims are falling. We've created 300,000 jobs in the last payroll report. So, yeah, we've got the FedExes of the world that are giving us some warnings. But by and large, everything's holding in. Now, what does that mean?

In a world of inflation, rates can keep going and keep going, and that's what's bothering the market. When things start to break, yields will plunge. mean clunge, and then you'll know that we're probably near a lobe. So right now, we're in a scenario where good news is bad news. And as far as the Fed goes, I think the Fed is trying to make up for their mistake from last year. I'm as critical as the Fed, but I think their mistake was they didn't start raising rates last year. They waited way too long, and they're not playing catch up. And I also think the other thing that people have to maybe think about is this is a persistent inflation. This is not a one-time thing because we reopen the economy and then inflation

disappears. It's ongoing. It needs to be dealt with. And that's what the Fed's trying to do. So, yes, I think this is going to be a very difficult period for investors. Jim, while the Fed has a dual mandate, the significant moves we're seeing across Europe, whether it's the stock 600 now trading at a 20% 20% down from its all-time high, the UK pound at a 37-year low, Bonneal spiking, as you pointed out, could that pressure the Fed? from raising rates set by 75 basis points at the next meeting? Yeah, because it could break something. You could break something really bad.

So the Fed wants to slow the economy to basically bring down inflation. The problem is, and I'll use a euphemism, there'll be collateral damage. That means other things will break, too. And you have to look to Europe. I mean, it's so bad in Europe right now that the Bank of England in August did something extraordinary. They forecasted a recession. No modern central bank forecast recessions, just like the Fed has.

on Wednesday. They always give you some low growth number and they say that we'll skip, skirt by with a soft landing. But they came right out and said that they're going to start a recession in the fourth quarter, which, by the way, starts next week. So they know that their economy is in a bad place. That's why they're massively cutting taxes and trying to stimulate, which is also bothering the bond market. All of that is a cocktail that could wind up causing a break, somewhat, something to break somewhere along the line that could change, alter the course of economic growth in the U.S., if not globally, and maybe get the Fed to change. But that's not happening yet.

You provide a lot of advice to hedge funds. What are you telling them right now? What's the bottom line on how to invest? I think that they have to consider that this inflation is something persistent, and it's going to take more than one cycle of raising rates to get rid of it. It's going to be a lot longer, which means this is going to be a difficult market as we go through this post-pandemic adjustment that we've been undergoing now for a year and a half. It's not over.

It will continue. This is not just, we'll sell off a few more months and that's the end of it, and then we'll have a seven-year rally. I think it's going to be a little bit more than that. They'll have to be patient. Jim, always great to see you. Thanks for lending your expertise. Jim Bianco. Coming up, the dollar threat is the strengthening greenback raising the risk of a global recession?

And could that force a Fed pivot? Plus General Mills, the best performing stock this week, is there more upside in this classic recession-proof, staple play? A longtime market watcher tells us whether he, He is long or short. And as we head to the break, stocks moving to the session lows down there, about 740 points. We're tracking the sell-off when Power Lunch returns. Welcome back to Power Lunch, everybody.

As stocks sit near session lows, the dollar index hitting its highest level since 2002 on pace for its best week since March of 2020, that's creating a global economic threat. And it could force the Fed's hand, according to the new CNBC op-ed by Ron. in Sana. Ron joins us now. He's senior advisor at Schroeder's and a CNBC contributor. You say, Ron, that the further strength of the dollar, raising risks of a global recession and risks breaking

the currency markets. Explain. So, Tyler, and you and I go back far enough on this one, and I'm sure Seema knows about it as well, but in 1985, the dollar was so strong that the then-G-5 group of nations had to coordinate it and weaken the dollar on purpose because it had become such an impediment to global growth. In 1994, the dollar strengthened so much. The peso crisis occurred caused the Fed to ease after tightening. 97 and 98, you had Asia and Russia. And I think we're approaching one of those historical inflection points again, where this type of tightening cycle, led by the Federal Reserve, in a somewhat asynchronous fashion with global central banks, is creating strains in global foreign exchange markets that could lead us to another point like that, which would ultimately force

the Fed. As Jim Bianco was indicating earlier, and maybe not on this particular issue, but to something breaking in the financial markets that would turn the Fed around, my guess is early next year, particularly if the dollar continues to soar as it's doing right now. Why does a rising dollar cause wreak such havoc

in other currencies, whether it's the pound, whether it's the peso, the end? Why does it cause such havoc? Well, it really depends. on the set of circumstances, you know, during the Asian currency crisis and the Russia crisis or the Mexican peso crisis in 94, they all had a lot of dollar denominated debt. And as their currencies were crashing in value, their external debt service burdens were going up. In this instance, we're exporting, if you will, to a certain extent, our own inflation by driving their

currencies down, just as Europe, for instance, is trying to fight it. Britain is trying to do whatever it can do to sustain its economy. And at some juncture, particularly in emerging markets, where I watch even more closely, you do have that risk of external dollar denominated debt becoming more burdensome and causing problems in the global financial architecture that then leads to, now in the case of Japan, a developed nation, first intervention since 1998 to support the currency or in the cases of emerging markets, the type of thing that could really unsettle their already inflation-burdened economies. And so I think that becomes problematic. And the risk of then a global recession is a type of thing that maybe gets the Fed to stop looking list.

You know, it's interesting. You mentioned the Plaza Accord, I referenced it, Ron. Back in 2012, when the yen hit an all-time high against the dollar, we actually saw a number of Japanese automakers move production to the U.S. to benefit from the four exchanges. I'm wondering if we could see the opposite happen if the dollar continues to strengthen. Well, that's not the current trend, right? So we're de-globalizing, FEMA, and we're seeing more, actually foreign manufacturers come to the United States more for security reasons than for appreciation reasons, right? I mean, their currencies every week, which make their products more attractive here in the United States. So whether we were to offshore, which is not in vogue

at the moment, is more these days a supply chain security question than a supply chain efficiency question, different set of circumstances in a post-pandemic environment and in a post-war environment. So I think maybe not, but I do think that the strength of the dollar and the rapid rise in interest rates is threatening the global financial architecture and is going to expose some weakness somewhere at some juncture in the future that creates that breaking point that Jim talked about earlier and prompts the Fed to stop raising rates. So what if that happens, certainly in listening to Chair Powell on Wednesday, I didn't hear a peep about a pivot or any he wasn't he wasn't letting any air in there at all. No, I can't.

And they never do, right? I mean, in 1994, everything talks about that engineered soft landing. The only reason the Fed stopped raising rates in 94 was that the Mexican peso crisis occurred. Orange County went bankrupt in December of that year. A money market mutual fund broke the buck. And the Fed stopped. In 97, they were going to tighten that it was the Asian currency crisis. 98, they wanted to tighten.

Russia defaulted on its debt. Long-term capital collapsed. And the Fed eased. So here the stake of that, isn't it, Ron? is that if you have that kind of intervening crisis and the Fed is forced to pause or led to pause, then what happens to inflation,

to its fight on inflation? Does that go on pause? Because if inflation isn't tamed, you've got a huge long-term problem. So you referenced Jeremy Siegel earlier, and he's now saying that inflation is collapsing after complaining about it being too high last year and the Fed being behind the curve

and that rents are going to come down and CPI is going to crash. I don't, where I part company with Jim Bianco, my very good friend, is I do not think that inflation is entrenched. I still think it's transitory in the loosest sense of the word, being not permanent. And I think we're already seeing inflation roll back. And the Fed's probably done enough to ensure that we're going to see a weaker economy, less inflation.

The wage question really is around population and labor force growth, not around an overheating economy. So I think there's so many disparate and moving parts that interest rate policy is not the cure-all for some parts of these inflation questions like wage inflation. But the Fed's already done enough to tame goods and services inflation going forward. And if they keep going, they're going to, they will break something. All right. Ron, thank you very much. Have a great weekend. You too. Thank you. Good to see you. Ron Insana.

The Dow currently down 725 points further ahead between the growing EV demand and supply cuts out of China. lithium prices are spiking, quadrupling since 2021. We will tell you why. Speaking of, check out the EV stocks. Neo, Tesla leading the declines today. Rivian down more than 60% this year. And as we head to break a reminder, CNBC's delivering alpha returning in-person on September 28th. The world's top investors will discuss risk, opportunity, and navigating the new market dynamic. You can scan the QR code on the screen you see it right there or go to CNBC events. com to register. We will be right back. Let's take a look at markets with less than two hours left

in trade. The Dow industrials at 29,354, so breaking below that 30,000 level. S&P 500 at 3662. The S&P June closing low was 3666. So we've broken through that down 2.5% on the day. Best performing stock for the week is General Mills. Worst performing stocks from the Dow, Boeing, Dow and Intel. Ahead on Power Lines, the long and shorts of this market. Even amid this volatility, there are opportunities for investors. We will uncover the best names to bet on. Plus, as we head to break, check out some names that investors are shorting most.

3M, American Airlines, Whirlpool, and Generac. We'll be right back. 90 minutes left in the trading day and week. Let's get you caught up on markets, stocks, bonds, and commodities, and some ideas on what to buy and what to short in this market. But first, let's bring in Bob Bassani, who's at the New York Stock Exchange, watching the sell-off. We're pretty much at the lows of the day, Bob. Yes, and I want to show you broad indexes here, the S&P, the mid-cap, small-cap. You'll notice something? It's all the same. We're all down basically about 3%. That's the sign that this is a very, very broad sell-off.

By the way, we tried bouncing in 3666. That's the old June 16th low. We held for a little while, bounce and it then just sort of fell back again. Modest attempts to buy, but not enough real energy, not enough buying power to really bring off the lows. The story today is sort of collapse of the commodity complex, energy metals and mining. You see some of these big energy ETFs, oil services, exploration and production, natural gas ETFs. There's the global energy one. That's the big one. Everything's down 7%. Again, broad, broad decline. Same with the metals and mining complex. Freeport Mac Moran. You can look at Peabody, which is a coal company. Cleveland Cliffs in the steel business, Century Aluminum. You see this? Everything the same, down 7, 8, 9%. Big Cap Tech, 52-week lows in about half of the big names.

Microsoft, AMD, Salesforce, that's a 52-week low, not for Apple, but you see everything down 2.5%. Anything that I like out there, I like the VIX is finally over 30, SEMA. You know, panicky levels for the VIX this year have been about 35. And people have been wondering, gee, why isn't the VIX over 30? You think you get a little more panicky? Finally starting to see that. And when we've gotten close to this territory this year, SEMA, this is often been short-term low. Not quite short-term low in the market. Not quite there yet, Seema, but this is, I think, a big move up in the VIX.

Back to you. 86, Bob, thank you. Well, markets are certainly interconnected. Stocks and bonds moving lower together today. That is sending yields even higher. And Rick Santelli, the big question investors are trying to understand just high, how high will yields go? Well, they'll probably go as high as the selling takes them,

and the selling, of course, is deriving some of its potency, not only from the Fed, but from a variety of reasons that investors have sought to push back a bit. Trying to pick bottoms and tops in different markets and two years, no exception. Look at a one week of two-year note yields. Realized, this is the 12th consecutive trading session of higher yields, and I'm assuming we're going to close,

hierarchins, it's up already eight basis points and it's not on its highs. It's up seven on the, yeah, seven and a half on the day, up 32 basis points on the week. Notes over bonds. This knob spread isn't very popular to everybody, but traders love it and they use it for a variety of signals. Look at it. It is the most inverted at minus eight basis points in 22 years, and many believe it gives you notions of capitulation. So you really want to pay attention to the knob spread. The ETFs that represent high yield and investment grade, well, here's the YG. And if you look past the March 2020 COVID affected issues on the marketplace, it is basically at the lowest levels going all the way back to 2009. And the LQD, the HYG is high grade or high

yield junk bonds, and the LQD is investment grade. Now I'm not showing the LQD, but it is below its March extreme at the lowest levels since 2010. And finally, we're all talking about the dollar index, but I have to show the chart again. Here's a one week, a month to date of the dollar index, up 4% for the month and it isn't even over. We settled August at 108.7, a tremendous move, and I agree with Ron and Sana. The Fed wants to do us all a good favor. It ought to globalize its views of the world because the dollar index is really changing the dynamics and they need to Keep up. Seema. Yeah, they certainly do. Dollar index that $113. Rick, thank you. Oil prices falling along with just about everything else today, down nearly 6% below $80 a barrel. And the lowest level

since January of this year before Russia invaded Ukraine, crude, just for some perspective, is down more than 7% just this week. We also want to take a look at natural gas, down about 12% this week and 25% for the month. All right, as stocks continue to decline. Our next guest says he's concerned about a coming earnings recession, and he has a list of names to short and to go long. Michael Cantowitz, Chief Investment Strategist at Piper Sandler. Michael, let's first start with the names that you think investors should buy. Hi, Seema, Tyler. Thanks for having me on. So, you know, investors want to look for names that are countercyclical and that are going to be able to hang in there during this global downturn that

that we're experiencing right now, and that's probably not going to end until some point later next year. So we like names that have good profitable fundamentals that have realized earnings and good cash flow. So names like Regeneron, General Mills, Campbell Soup, you know, not necessarily all very sexy stuff, but this is the year you want soup in your portfolio, for lack of a better word. And names that you're short? So names to be avoiding would be names that are extremely cyclical. So what are the names that are at most risk at this point? So names that are showing up in our short model as having poor fundamentals and our macro avoid index, such as names that have very cyclical profiles, names like Green Breyer companies,

Boeing, signature bank. And again, that's just a sample of names. In general, you want to avoid companies that are very cyclical that have very cyclical earnings. and are going to be at risk of this global downturn. I want to go back to one of our earlier guests, Savita Subramamian, who said she didn't agree with the consensus view that 2023 corporate earnings were going to grow 8%. I hear you saying exactly the same thing, that we're going to go into an earnings recession.

And if you don't have rising profits, it's very hard for you to have rising stock prices. Yeah, absolutely. Totally agree. And there aren't too many institutional investors that actually believe those numbers. And so we're just beginning the downturn in earnings. Earnings expectations only peaked in June, though the market obviously peaked in January. And so most of this decline in the market this year has really been due to higher interest rates. And now that's beginning to collide with slower earnings growth, so slower macro data,

and some stresses that we're beginning to see around the world in central banks, currencies, as you mentioned, the dollar. So, you know, the unfortunate reality is that as growth slows, bad things happen, and we find out, you know, where the leverage is, where the excesses are today, and after 15 years of zero rate, QE forever, I'd be hard pressed to believe that there are not a lot of excesses hiding out that we'll discover in the next year as a global economy continues to slow down. Are companies going to continue buying back stock? And would they be tempted to buy back stock because prices are as low as they are? Or? Is the cost of capital just too high for them now to buy back stock?

I think it depends on the company. It depends on the company, Tyler. You know, those companies that have real healthy fundamentals may use as an opportunity to do that. But I think the days of debt financed buybacks are going to be halted for some time. And a lot of that has to do with strong cyclical earnings trends. And that's just not the backdrop any longer. So we would expect that to decline. And of course, we have a new tax added to those as well. So we'll see that this year pick up.

next year, I think it's going to come down quite a bit. Michael, always great to see you. Thank you for spending a little time with us today. We appreciate it. All right. Michael Cantowitz. All right, safety in dividends, as the sell-off intensifies, investors may look to sectors yielding higher payouts.

We all know energy has big yields, but could health care be a better bet? We'll examine that when we return. Looking at the top of the S&P 500 this week, big pharma names are among the least bad. Lillie Hire, Merck, Bristol, J&J, all a little bit lower, but only by about 1%, compared with a 5% drop for the broader average. Let's go to Bertha Coombs now for more on what might be making healthcare attractive to investors right now. Bertha.

You know, Tyler, healthcare has been seen as a bit of a port in a storm during the market's volatility, but in a rising rate environment, the stocks are also paying some healthy dividends, led by the drug makers, which have a yield of over 2.6% on average right now. Theatris, which focuses on bringing medications and diagnostics to emerging markets, tops the list with a 5.4 percent yield, according to FACSET. Gilead Science has an indicated annual dividend of $2.92 a share. That's a 4.6 percent yield, while Merck spin-off Organan, which specializes in women's health, is at 4.3 percent.

But a big reason for these outsized eels is the decline in their stock prices, with Viatris and Organan hitting new lows just yesterday. But when we did a CNBC pro screen for above-average dividend players with high buy ratings and above-average stock performance, two names stuck out. More than half of analysts covering AbbVe rate it a buy. It's got a 3.9 percent yield and indicated annual dividend of $5.54 a share. It's one of the top dividend picks for Art Hogan over at B. Riley and Gina Sanchez at Chanticoke Capital. meantime, almost two-thirds of analysts rate pharmacy giant CVS Health a buy.

And at a 2.2% dividend deal, it is actually one of the best health services payers right now, and its performance is better than most. You can read more about our screen of health care dividend plays on CNBC Pro. Seema? Bertha, thank you. Tyler, it was earlier this week. Gradient investment said health care, that's one way to play rising rates. They're more sheltered from the market volatility. Part of it having to do with a dividend, but they say they have pricing power in this environment.

Yeah, well, people will have really little choice but to pay for. We will pay for our health, no matter what, as we can. All right, still to come up, still to come on Power Lunch. We are going to monitor this market sell-off. And up next, today's three-stock lunch, trading some of the biggest laggards. Are there opportunities to buy the dip? But what about names holding up amid this downturn? A lot are in the consumer staples space.

Space, take a look at General Mills or Mel Foods and Kellogg, all hired today. We'll be right back. Time for today's three-stock lunch. We are going to dig into three of the week's biggest laggards to see if these beaten down names are worth buying right now. First up is Marathon Oil down nearly 16%. Caesar's Entertainment, it's down 23% and Ford off about 18%. Let's ask Scott Nations. He's president and CIO of Nation shares. Scott, let's begin with Marathon. Marathon, why not, down 16% so far this year? Well, exploration and production ends, you're going to have a really tough time. Marathon has a P.E. of below 5, but that's because the P.E is getting killed today down double digits. And that's because WTI is also getting killed. So P's coming down because the E is going to come down. This is an anti-recession stock.

It's a high beta stock, about 2.5 beta. So, Tyler, this is really, really tough sledding in an environment. like this. I would stay away. And Scott, I believe you're not a fan of Caesars either. No, I'm not. They don't have the Asian exposure to say Las Vegas fans does, but it's also going to be tough for Seizers. We know that corporations are going to cut back on travel and entertainment spending. And that's where the dollar really is for Las Vegas. P.E. at a buck 555, I mean 155, means it's really expensive. Online gaming or online sports betting is really interesting. But the acquisition per customer cost is about $500 to $750 per. And so while it's

interesting, that's not going to pay off for a while. I'd stay away from Cesar's. It's making a big round trip to the COVID low. All right. Let's, well, that's quite a statement there. And final name is Ford. Yeah, this is the most interesting name of the three by far. I think I've been a fan for a while. I've been wrong for a while. I think it's by far the best space in the auto. sector, the best name in the auto sector. I think it's better than Tesla. It's the best of the EV names and the legacy automakers.

PE of 6, forward PE of 6 means it's cheap. The problem is getting killed today because the supply chain issues really mundane ones. They can't get enough of the round blue, the oval blue badge that goes on the hood of the car. They can't get enough of other mundane

things. And that's even affecting their F-150 pickup trucks. And you know, when they can't ship those because of supply chain issues, you know they've got a real problem because F-150 pickups are insanely profitable. Yeah, and if you can't get the badge for your car, wow, that's really a telling statement. Let's talk about the market more broadly, Scott. Where are we headed? Well, we know that when markets get volatile, they stay volatile for a while. Really, there's a 10-syllable word for that I won't use now. You know, people are just really worried right now, of what's going on with interest rates and the two-year yield at 4%.

It tells you all you need to know about stocks. People are going to say, if I can get 4% a year for two years and the risk-free treasuries, then why do I want to put money in stocks right now and maybe get a little bit better return, but also take a whole bunch of risk. So until we get some sort of catalyst, we don't know what that is yet, but until we get something that says the worst is past, I think we're going to be lower to sideways for a while. All right, Scott, thank you very much for your insights today. We always enjoy having you on.

Appreciate it. Scott Nation. Thanks, Tyler. The NASDAQ is down 2.8 percent. Electric vehicle stocks sinking along with the rest of the market. Tesla off by 4%. Biking lithium, though, growing into a key issue for that group. We're going to look into it. Plus, as we had to break, check out autos and airlines,

which are all down double digits this week. We're back in two. Welcome back to Power Lunge. Stocks lower across the board today. continuing the post-fed sell-off. But we're always looking for opportunity in this market. As more people start driving electric vehicles, the demand for lithium is only going to increase.

Christina Parsonevless is looking at the lithium spike and what it means for investors, Christina. Well, lithium actually is inching closer and closer to its all-time high, and that doesn't necessarily bode well for EV makers because that means the battery is expensive. Lithium is necessary to build batteries, and there's actually no substitute right now.

prices in the Chinese market, the most liquid market that you're seeing on your screen, have more than tripled just in the past year alone. And so that's helped drive up the stock price of a lot of producers, like Alba Mall, which you're seeing on your screen, up 28% just in the past three months. Then you got Liven, or I should say AlbaMal up 24%, Livant, up 28%. And analysts and experts predict supply won't be able to catch up in the next decades. So that means that these prices could be sustained for even longer. City analysts point out many mining projects are facing issues getting environmental permits,

And in California, for example, there's even a new lithium extraction tax, making it harder for newcomers to enter the market. So supply is expected to stay stagnant while demand moves up. And automakers are pushing out, like you mentioned, CMA, even more EV models and government policies remain pretty supportive. So these are all, it bodes very well for demand for lithium. And so on CNBC Pro, we screened lithium names that are expected to outperform based on those with a majority buy rating and an upside price target of at least

20%. And I've got three names on the top of that list for you. You've got minor lithium Americas, battery maker, microvast, and then standard lithium. Those are the top three names there. Lithium Americas, the strongest performer in that group. You can see the only one in the green just over the last a year or so. But if you want to know other names, head to CNBC Pro for more from a sector that should benefit. Even Elon Musk says there's big money to be made in lithium. Christina, turning to the broader market, the NASDAG below 11,000. What's the key level? to watch. What are you hearing from traders? Oh, in terms of kale.

Predictions, I'm not going to put key levels, but the major concern is just how aggressive the Fed is getting, especially in November, and that's weighing heavily. You're seeing it across the board. The Fed has a dual mandate. It's an unemployment or keeping full employment and inflation. The fact that they're willing to sacrifice employment and keep raising rates is a major concern,

which is you're contributing to the sell-off that we're seeing in technology across the board today. And it seems like it's only going to get worse, and that's the sentiment. The sentiment is extremely negative and contributing to the sell-off. Quick you turn to lithium. If lithium is in such demand and EV is driving it, how come two of those three had major losses for the year? Because these are high-growth companies that still, many of them don't have their mining capabilities out yet,

so that would be supply is still not able to get out. And so that's the major issue. Some of these producers may be producing but not at full capacity. or, for example, one of the companies, I'm forgetting the name, they have a mine in Brazil. It's supposed to come online and that keeps on getting delayed. So the potential for these companies in the near term is very high, but some of them still have issues when it comes to getting that supply out there. So that's why you see that discrepancy in the stock price.

All right, Christina, Partsen-Evelace, thanks very much. Let's take you into the net last hour of trading with this note on the Dow, the S&P, and the NASDAQ. There's the Dow, down 812 points. New Low. I think that's a new low for the afternoon. right, Seema. And there's the S&P, 3649, taking out the June lows. Nasdaq down 330 points, almost 3% there, energy lagging all of the S&P 500 sector.

Worst performing stocks on the S&P 500 right now, Tyler, Marathon Oil, Hess and Slumberjay. It was Savita Supermanium who told us at the top of this hour that energy, she would be long energy, and she thinks that there is a floor below oil because of the geopolitics that are taking place. Just heard from Scott Nation saying no, no on marathon. All right, thanks for watching Power Lunch.