Power Lunch - Missing The Target, Power Players 8/16/23

Episode Date: August 16, 2023

Target is slashing its full-year forecast, as the retail giant fails to hold onto an increasingly “thrifty” consumer. We’ll discuss the fallout for both the company and retail sector. Plus, Hertz and GM are standing firm on the future of EV car rentals. The CEOs of both companies will join us to discuss that and the auto industry at-large. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Well, welcome to Power Lunch. I am Courtney Reagan alongside Tyler Matheson. The Fed releasing minutes, just minutes away from releasing the latest Fed minutes. Let's see what we have ahead going into this for the major averages, the Dow, the NASDAQ, and the S&P 500, all lower, but only slightly so. We'll see if anything changes here. The NASDAQ off nearly half a percent before we get these results. It's been a somewhat muted day here, at least right now, before we hear more details on the Fed's thinking. Will they have? hike, will they pause? We'll have to wait and see we're going to discuss everything and see if the market can make some moves. Of course, watching the yields in the 10 year as well. Steve Leasman has the details for those minutes. Steve, what you got? Courtney, the minutes from the Fed's most recent meeting show that most of the participants in the meeting still saw significant upside risk to inflation that could require further tightening. So at least in that one statement, there, a pretty hawkish outlook there from the Federal Reserve, but hold on before you make your immediate trades, because these minutes are a mishmash of different points of view. Some of the

top line comments, some saw downside risk to the economy and upside risk to unemployment, so that kind of sort of works against that, but it's a smaller number than the most you were concerned about the upside risk. A number said risks were two-sided, and we learned for the first time in these minutes that a couple participants, apparently not voters, just people who were at the table there among the bank presidents, wanted to keep the rates unchanged. So they were not in favor of, they were not voters, apparently, or if they were, they didn't vote, they didn't vote what they said their concern was wanting to keep rates unchanged. Now, I'm going to give you some positive comments, and I'm going to offset those with negative

or hawkish comments. On the positive, dovish side, some saws tentative signs inflation could be abating, including softening good core goods prices. there were continuing signs of supply and demand in labor coming into better balance. Tighter financial conditions were expected to slow consumption and a gradual slowing appeared to be in progress in the economy. That was back when they met in July. However, that has not been the case. So here are some of the negative hawkish comments that were there.

They said real GDP had demonstrated resilience. That's been the case over the intermeeting period here. And the economy is showing considerable momentum. Again, that's been the case. This group saw payroll and wage growth that's still high, and several said significant disinflation had to become apparent in core services X housing for the Fed to relax on the idea of raising rates in the future. There was a high degree of uncertainty over the effects of past hikes. And one other thing I want to leave you with is this notion here that says that below trend growth is needed to bring supply in line with demand. We have not, Tyler, as you know from our discussion, just an hour ago, has.

at least forecast here for below-trend growth. So that group in the Fed, not getting what they want in terms of below-trend growth. All right, Steve, thank you very much. And stick around for just a moment for more reaction to the Fed Minutes. Let's bring in Stephen Stanley, Chief U.S. Economist at Santander. Mr. Stanley, welcome. Good to have you with. I'm going to call you, Mr. Stanley, because we've still got Steve Leesman. I don't want there to be any confusion. What's your reaction to what they said? So it sounds like what we heard from Chairman Powell a few weeks ago, not surprisingly. I mean, since the June meeting from June to July, the growth data was stronger and the inflation data was softer, and it kind of offset. And I think that left them

more or less where they had been in June, which was most people were thinking they were going to have to go a couple more times. So that would be one more past July. One more past July, do you expect that to be September or not? I actually think they'll skip the September meeting. I think they're on every other meeting tempo. So they skipped in June, went in July. I think they'll skip September and then take another look at it. And is November the last for a while? I think it is. Wait and watch. It depends on the data, of course, but I think it will be. Yeah.

And what about the point that Steve made talking about disinflation and housing to relax those hikes? I mean, that has been a key sticking point. Yeah, well, we've gotten some better data on inflation. And what I think we're waiting to see is if that has staying power, is inflation going to continue to decelerate or is it going to stay hot? I mean, the Fed models would say that if the labor market is as hot as it's been, inflation is probably going to stay pretty high. And so we've gotten good news, but it's not clear whether it's going to persist.

So in this environment, how long would you have to see a trend of less hot inflation, if not deflation, to sort of feel like, okay, we're on more solid footing here? Yeah. So we have two months of good CPI numbers. I think if you get, you know, three or four, then you're starting to get to a point where you can say, okay, at a minimum, we can be very patient. Maybe we don't have to go or we can just pause for a while and see what happens. But there's always the risk.

Inflation may come down for a while and then re-accelerate, right? So you're always kind of hostage to the day. How do you handicap recession risk, if at all? I don't think we're going to see recession in the near term. I think the consumer is still very strong, which we saw yesterday with the retail sales numbers. It looks like third quarter of GDP could be very robust. But I think 2024, there's a little bit more of a risk. I think we'll probably muddle through, but if we're going to get a recession, it's probably going to be next year.

That will be interesting in a political year, but very much so, because it's very hard for an incumbent to run against a slowing economy. Sure. Right? Yeah. Yeah, I mean, you know, we're not thinking too much about that just yet. That's going to be a big deal in six or nine months. Steve Leesman, I know you're still with us. and Stephen here makes a good point about retail sales and a potential for re-acceleration. When I saw how strong those numbers were, that was sort of my first fear.

I mean, the consumer doesn't really appear to be, at least in the broad sense, really slowing down in spending. Is that a potential risk for inflation trends to move back higher, go the opposite way that the Fed is intending? It definitely is. And first of all, I just want to point out for Tyler that Stephen spells Stephen with a pH. So there's really no confusion at all when you say it. I can hear the difference when the way you say it. So just to be clear about that, these minutes, I think, would be a problem

if we didn't have Jackson Hole next week because I would be thoroughly confused with very little chance of getting unconfused. But next week, we're going to have a bunch of interviews with Fed officials. The Fed chairman is going to talk. And here's where we're at. I want to just leave you, remind me of two of the headlines.

One is that most still saw significant upside risk to inflation that could require further tightening. I don't know if that's still the case because since then we've had another inflation report. And then there's this idea about the requirement that we have below-trend growth to bring supply and demand into inflation. We are moving the other way. That's very significant to me. And I don't know how Fed officials are processing that. It's going to be very important to listen to them, given, you know, Courtney's question of retail being so much higher.

You've got this crazy GDP number coming out of the Atlanta Fed of 5.8 percent following an upside-support. prize in the second quarter of 2.4%. So there are really important questions on the table here as to whether or not the Federal Reserve, amid what it's saying here of lower inflation, some cooling in the job market, feels it needs to lean more heavily against the economic momentum that's out there than we believe. I think Stevens, with a pH, is 100% right, that September is not on the table, but November could be on the table. And who knows about even more depending upon how much they think they need to press on this economy to get it back down towards below potential, not where it is right now, which is well above potential.

Which is well above. All right. Gentlemen, thank you very much. Steve with a V.E. Leasman and Stephen P.H. Stanley, thank you very much, gentlemen. Well, let's get the traders take on the Fed Minutes. Rick Santelli is standing by in Chicago. Rick, we've been paying very close attention to the yields.

What's going on here? You know, it's very interesting. because yields were definitely on the upside. They've been on the upside. But since the release of the minutes, moments ago, as you look at two-day charts, there hasn't been a lot of movement. Two-year note yields are right around where they're at now, 496, around 424. They've moved a little bit higher in tens. Dollar index, very firm, but it was firm before the number. The real issue here continues to be what Steve Leesman said, that there is generally a amount of confusion by many Fed Watchers, whether they read the statement, or they listen to press conferences. But the notion that Jackson Hole is going to clarify this, let's see what a trader thinks. Paul. Hey, Rick.

How you doing? All right, well, we just had the minutes real quickly before I get into the meat of what I want to ask you. What were your thoughts? What markets moved? What can we extrapolate? Well, we really didn't see much, Rick. Spoozer down 0.1% from when the number came out.

That's nothing. What about volatility? Vicks, same. You can see down here it's pretty quiet. You know, when you deal with clients and customers and you talk about the Federal Reserve, and be frank here, there is a certain amount of notion where many believe that the Fed has some crystal ball. They can see a little bit more clearly versus us or the average investor. Would you agree with that?

I think people want to feel that way. Right now, I think we're seeing a little less certainty that there's a clear path. I would agree with that, okay? So if our hypothesis is the brightest and the best don't have a historical sampling to compare this particular series of events post-COVID with anything in the past, that means we're in a unique spot. So how do you deal with it, A, from the equity perspective and the volatility and option perspective? Well, what we saw a few weeks ago, when spools were at their highs, we saw some very sizable orders coming into the options market, calling a top, maybe calling a low involved. and they were pretty close. Well, that's how it turned out.

You know, with the rates curve steepening and the back end especially, impacting some valuations on the big techs, those stocks have let us on our way down. The volatility has started to come back out a little bit, short ball strategies are doing better the last few days. So the next move and spools will be what are going to tell us

if we really did see that top there or if this was just a healthy pullback. It sounds to me like you believe we're at sort of an equilibrium in the equity markets. But would that be a fair way to say it that after all the shorts got out moving at higher over the last two and a half months, basically, we're at a point where we need to monitor new developments in the data, which would be the inputs? Yeah, the data will still matter. I think when you have less certainty, the data is going to push the market on. Real quickly, though, I'll tell you one thing that isn't at an equilibrium,

that's interest rates. Their guns hot today paid particularly close attention to four and a quarter on which side of that level 10-year note yields closed because that could change a lot of dynamics moving forward. Courtney, back to you. Thank you very much, Rick. You know, Kelly Evans is going to be disappointed. She's not here today watching the yield on the tenure. Thank you very much. Well, coming up, Target slashing its full year forecast, the retailer failing to hold on to an increasingly thrifty consumer. We're going to discuss that coming up next. In further ahead, we'll speak with two power players in the auto industry. The CEOs of GM&Hertz join us live when Power Lunch returns.

Target shares higher today as earnings handily beat estimates, but the retail giant still reported a miss on revenue and is slashing its full year sales and profit forecast. As shoppers show signs of slowing discretionary spending there. So what's the real story? What's going on? The quarter wasn't a clean one. Our next guest still sees more upside for the stock. Despite it all, Eddie Ruma, managing director at Piper Sandler joins us now.

Ed, I have to say, I saw Target's results. I know expectations obviously were relatively low based on what Target told us last quarter about lower discretionary spending. But then you have a retailer like TJX, very discretionary and what it sells, largely clothing and home goods. They had really good results. So what's going on here? Is this a target issue? Look, I mean, I think KJX may have been a little bit more of a one-off. Obviously, extraordinary results.

It's one of our top picks right now. But I think as it relates to discretion, I think we're still in a very mixed environment. I think discretionary trends are still somewhat difficult, although even at Target, they did on the margins on a little bit more constructive. They talked about seeing some green shoots in the consumer and feeling a little bit better. They talked about the traffic trends improving from June to July. So, you know, again, second quarter, I think when all of a sudden done, it proved to be a tough one for discretionary, but it's certainly not getting incrementally worse, which I think is pretty positive. So, Ed, I understand what you're saying about some of those green shoots that Target referred to. And they certainly said that July improved over June.

If that's the case, though, and they be profit handily by 41 cents over the street, why take your profit forecast down by a dollar for the remaining two quarters and lower that sales guidance? We're just trying to be conservative, right? I think obviously in this environment, you know, companies continue to kind of continue to struggle against the consumer. We just wanted to make sure we were positioned correctly from an earnings estimate perspective. We actually lowered our estimates earlier this week based on some of the data we were seeing in terms of traffic. but I think the bigger picture is less about what we see for the balance of this year, but is more around the longer-term opportunity in 24 and 25.

And I think what we heard from Target today, while still very early, gives us confidence that they can regain some of the margins they've lost for the past couple quarters. We had a guest on in the last hour who gave his diagnosis of what has ailed Target, not just over the past six months or year, but over the past three years. If I asked you that question, what would you say has been the problem there? I mean, I think some of it's been mixed, right? I think, you know, we've been in this environment that's been very focused on food and must-have items, right? And this has been really since inflation started.

So I think that's certainly ailed target, given that they just have a lower food mix than some of their other peers. I think some of it is some of their peers are taking out of Target's playbook, right? Target has been known for great and differentiated merchandise private label. And you're seeing everyone across the complex, right, getting better at private label, getting better at apparel. And so I think that's all probably hurt target to some extent or another. I think the bigger, you know, kind of overarching reason that we continue to watch is, you know, you see at Walmart that candidly is getting better at that more upscale consumer, that over 100,000 consumer. That's directly in Target's wheelhouse.

So there's certain a little bit more head-to-head competition, I think, than we've seen in a long time. So the competition is, the other guest pointed to inventory issues that seem still in his point of view to be bedeviling them. Do you see that? I mean, their inventory numbers were actually pretty clean. You know, they were down 17% year over year. On the call management was very constructive about inventory. We did checks. We've done checks even this past weekend and feel pretty good about where they are in a position for the balance of the year.

So I actually think inventory is less of an issue. And in fact, I think the gross margin results you saw it really pointed to that, right? They missed on top line, yet grosses were up over 550 basis points. That doesn't seem like an inventory issue to us. So, Ed, I have a question sort of about the cadence. of what's going on with the comparable sales result. So they put up a negative 5.4%. The last time the comparable sales were negative

was starting in the second quarter of 2016 and ran for four quarters. At that point, that was right around the time that Target had posted a blog post, allowing its customers to use whatever bathroom that they chose based on their gender identity. They got a lot of backlash in one of those cultural flashpoint moments.

And we know that during, this quarter, there was another flashpoint moment when Target had pride merchandise that some customers were not happy with. Target said that there was threats of violence against their employees and shoppers. As a result, they made some changes. Executive said very clearly to me yesterday that they saw business be hurt in May and June and after they made the adjustments that it normalized in July. So I guess my question is, can we expect this to be a one-off quarter, or will we see what we saw in 2016, where it's going to take some time for them to build back whatever business that they lost because of this controversy?

I think it will take some time. I'm not sure that it will be as significant of a falloff, or at least for the duration that it was back then. We do think it'll take some time, right? We're currently modeling, you know, kind of negative mid-single digit comps for the balance of the year. That said, you know, you heard on the conference call, I think management's taking a different approach, right? They said repeatedly, you know, we have to be a retailer for everybody, inclusivity. And so I think, you know, kind of hopefully the likelihood of unforested areas like this probably goes down. The other piece I add is Target, I think, does really well during holiday moments, right? We're in this key selling season between back to school,

back to campus, Halloween, Thanksgiving, Christmas. So I think you're kind of heading into the time where they shine. And so, you know, certainly we put our estimates where we put them, but clearly this is, this is seasonally a good period for Target. So let's talk about. So let's Talk about that unforced error because, Courtney, it's a really interesting, it's an interesting point. Was the issue here where the goods were displayed? Was the issue that these goods and the displays that went with them in and of themselves aggravated certain shoppers? And how do you thread that needle if you're a target? It is an increasingly difficult needle, I think, for any of our companies to thread.

You know, one thing that they had indicated was that some of the merchandise was out earlier than some of their peers. You know, I think they've historically been a leader in some of these efforts. And so maybe you put it out two weeks later, right? I think, you know, some of it is maybe, you know, some of the merchandise and the composition of it. But ultimately, you know, I think what we continue here from Target is, you know, retailer for everyone, inclusivity. And so I think, you know, you can embrace all that without necessarily being kind of on the tip of the spear. Ed, before we let you go, I mean, Target shares have fallen.

and they're not up nearly as much as they were in the pre-market when these numbers first came out, but still higher by 4%. I'm surprised. Should I be? Are you? I would have thought the shares would have been up higher, candidly, given the magnitude of the gross margin beat. But look, I think, you know, their targets had, and if you go back, a number of quarters of misses, I think this is certainly a show me type story.

And so, you know, yes, we saw some improvement sequentially within the quarter. I think we're going to have to kind of measure them over the next couple of quarters. to decide whether A, they can kind of hold on some of these pandemic ends that they had, and B, get back some of these customers that they may have alienated in the medium term. Ed, thank you so much for joining us. I know it's a busy stretch of time for us both. Thank you for being here. Interesting conversation.

All right, further ahead, counter Intel, China crushing Intel's plans to acquire tower semiconductor. Details when power lunch returns. Well, a new potential bid are reportedly emerging. For U.S. Steel, Pippa Stevens joins us now with the latest. This deal, we said the other day this company is in play, and it is. It is. And the bidding war for U.S. deal could be going global. Luxembourg-based Arxelar Matal is reportedly considering throwing its hat in the ring.

That's according to Reuters, citing sources, familiar with the matter. This after, privately held S-Mark, submitting an all-cash offer on Monday at $35 per share. One day after Cleveland Cliffs disclosed its own offer, of $35 per share through a mix of cash and stock, valuing U.S. Steel at over $7 billion. Now, U.S. Steel called that offer unreasonable, but said it's evaluating strategic alternatives and that it's received multiple unsolicited proposals. Meantime, sticking with the metals trade, we are seeing weakness across the board today, with steel, copper, aluminum, and tin all lower and in the red for the week. That's dragging down some of the largest miners with the Global X-Copper

ETF down for a ninth straight day for the first time in four years. So the weakness in the base and industrial metals. Is there really any doubt that U.S. Steel is going to get taken over? That is not a question for me. But it seems like there is now a bidding war emerging, and it seems like multiple parties. We know multiple parties are interested. But I think there are so... When is all cash?

Yeah, yeah. And I think some key considerations include the DOJ, of course, and whether or not that would be seen as an antitrust issue. And so that's one key thing to watch. And then also the USW, that union is so incredibly important. And they have veto rights over certain. And one of the potential buyers is Arcelor Mital. And they're foreign, or we think?

Yeah, they are foreign and they are reportedly considering offering a bit. So we don't have full disclosure yet on that one. But it is interesting because Cleveland... That would probably bring Sifias into the play, wouldn't it? Well, Cleveland Cliffs did buy Arcelor Mottal's U.S. assets a couple years ago. So there is some, you know, I wonder if they would be interested in reentering this market. Wow, fascinating stuff. A lot to watch here.

Yeah, exactly. Coming up on Power Lunch, Hertz and GM, standing firm on the future of EV car rentals. The CEOs of both companies are joining us next to discuss that in the auto industry at large. We'll be right back. Let's get to Bertha Coombs for the CNBC News Update. Hi, Bertha. Hi, Courtney. The wildfires on the Hawaiian Island of Maui could cost insurers $3.2 billion.

That according to the new estimate from Karen Clark and company, 2,200 buildings were damaged or destroyed within the fire perimeter, most of them residential. It found another 3,000 suffered secondary impacts from things such as smoke. The official death toll now from the fire stands at 106. And the grim task of locating more victims falling to search and rescue teams who often rely on specially trained dogs to help. Among them, canine unit from the famed Miami-Dade Urban search and rescue team is on its way. Femma says, as of Monday, there were 20 dogs deployed to Maui. And from animals who are helping to those in need, the Maui Humane Society estimates 3,000 pets are missing from

the Lahaina area. Reps for the Society tell ABC News that they've taken in 52 injured animals so far. Tyler, I know there are a lot of folks trying to help with the animals. It's such a sad, sad. All the folks are devastated. So many levels. Bertha, thank you very much. Well, General Motors today announcing an investment in a company called Mitra cam. It is a battery materials maker.

I hope I got it right. Maybe it's Mitra. I'm not sure. Make EV vehicles more affordable? That's the whole point here. It's just one of the company's efforts to grow in EVs, including a deal with Hertz, to add 175,000 EV rentals to that company's fleet. Joining us now to talk more about that rollout and the potential challenges,

GM CEO, Mary Barra, and Hertz CEO, Stephen Scher. And our own Phil LeBow. Hi, Phil. Hey, Tyler. Stephen, let's begin first off. You heard what Tyler had to say about you and General Motors. It's been known for some time. You guys have talked at length about your relationship and the vehicles,

the EVs you're buying from General Motors. You guys are putting together a new series, and we'll talk about that in a bit where you show people who are watching that you can go anywhere when you rent an EV. What kind of demand are you seeing from Hertz customers when it comes to renting an electric vehicle? Well, Phil, good to be with you and good to be with Mary, where obviously the relationship between Hertz and General Motors is only growing. But we're seeing demand in a number of areas of our business. First, we're seeing it in leisure. We're also seeing it in the corporate business. where corporate customers of ours want to put their employees into electric vehicles to satisfy

some of their own sustainability objectives. And we're obviously renting electric vehicles to Uber, Lyft, and other rideshare drivers. Where this turns out to be a very profitable venture, both for us and for them, where drivers can make considerably more money on a weekly basis renting an electric vehicle. And we're just very excited to be engaged with GM and starting to take delivery on the 175,000 cars that we intend to buy. Hey, Mary, how much does this relationship help you reach potential buyers? People who, they may be GM owners of vehicles, but they've never thought about buying an electric vehicle. And then they see it at Hertz and they decide, okay, I'll try it.

Well, first of all, thanks, Phil, and thanks, Stephen. Really appreciate the opportunity to talk to you about it because I think it's very significant. Because like you said, even if somebody owns an existing General Motors product, but it's an internal combustion engine, having that opportunity to experience an electric vehicle, I think is really game-changing. I mean, it's instant torque. The vehicles are, you know, are beautifully designed. And so we think it's going to be very important to drive EV adoption. Steven, speaking of adopting electric vehicles or being more exposed to them, one of the big concerns that I hear from people, whether they're renting from Hertz, whether they're driving

an electric vehicle that they own, is public charging stations. J.D. Power out with a report today saying people are more dissatisfied than ever before when it comes to public charging stations. Are you concerned that this is a limiting factor that might make people think twice before they rent an EV? I wouldn't say I'm concerned so much as we're focused on it. I mean, we have about 3,000 of our own proprietary chargers, which are meant to keep our fleet running. But we're in partnership with BP, as you know, to help develop and roll out charging stations all across the country. And what BP brings is obviously the knowledge, the know-how, and the financial might to bring charging stations to various cities in the U.S. We obviously have locations in proximity to

about 90 percent of the U.S. population. We're putting those locations to work. We obviously have the cars. We know where they're going. We know where they're dwelling. And we have an opportunity to grow this out. And we're partnering with cities all across the U.S. as part of a Hertz Electrifies program, Houston, Atlanta, Orlando. And we hope to announce. others soon, Denver as well, all with an effort to sort of grow out charging stations. But I will tell you, having been an observer of the market for a long, long time, you know, to the extent that we continue to see growth in EV sale, rental, utilization, you can be assured that capital follows.

And we get inbounds all the time from infrastructure funds and other sources of capital to put against this opportunity. And so I'm sure it will come as it is coming now. Mary, why are so many public chargers just not up to snuff? And I know you're working with Pilot in terms of their truck stops and with EV go in terms of adding new public charging stations. But generally speaking, when you talk with others in the industry, when you talk with the people in your company, why are so many of the public chargers just not doing what they should be doing? Well, I think it's a good point. And I agree with Stephen that this is a key area of focus.

And we're working with all the providers we're partnered with. And that's about, 13,000 chargers. And in some cases, we're working with those providers to make sure that the, you know, when an individual gets to the charging station, it's actually working, it's available, and it's very easy to use. Frankly, it can be easier to use than when you're filling up your vehicle with gas. I think you mentioned the pilot company, and we'll have those chargers are going to be available starting the next couple weeks. And I think that's going to be significant because they'll be at pilot company stations. So there's going to be an attendant there who knows immediately if there's an issue that they can fix to get the charger working.

And then, of course, we signed on to partner with Tesla. And early next year, we'll go from having about 13,000 charging locations to 25,000 charging locations. And then we've also joined the joint venture where we're one of six companies that are going to work to install over 30,000. And, of course, we're making sure that as these chargers, you know, are installed, that they are going to have the reliability and the ease of. of use that they have to have. And so I think there's, it's a focus not only to get enough

charging stations, it's a focus to make sure they're always operational. Mary, I know we are talking about EVs, but I want to switch gears for a second and ask you about what's happening with the UAW negotiations. I know you're not going to negotiate in public. I know you're not going to sit here and say, point by point, this is what we believe. But when you hear the head of the UAW say, we want a 40% raise, give people some perspective in terms of how untenable is that for General Motors to say, okay, we can increase our labor costs by 40%. Well, Phil, you know, what I will say about negotiations, we're right in the middle of it, and we are working very hard, and we're at the bargaining table, and we want to make sure that we have

reached an agreement that is going to be good for the GMT members, good for the company, good for our shareholders, but also recognize that for every job that General Motors provides, it's about six other jobs that follow on when you look at the supply base, the dealers, and beyond. So we recognize the significant responsibility that we have, and we're at the table, and we're there in earnest to do the right thing for all parties. Also, you know, want to recognize the fact that, you know, I really appreciate everything our manufacturing team members have done over the last several years when you think about all the work through COVID to semiconductor shortages. And so I'm very proud of the manufacturing team,

and we're looking to get a good agreement for everyone that also provides security for their long-term future. Mary, it's Tyler Matheson back at headquarters. We've been speaking a lot about those public charging stations, and it's good to hear that there'll be much more interoperability among them from one brand to another. But what is GM doing to help or subsidize people who want quick-charging capability at their home? You know, we have opportunities and with our GM energy from a quick charge perspective, we're working with companies.

But you know, really when you're at your home, I think a level two charger is probably most appropriate. And you can schedule it to be charged when energy costs are low and, you know, do that out of, you know, the app on your phone associated with the vehicle. And so we think that's probably the best solution. But, you know, we have partnerships with level two charger, you know, fast charging as well. All right. All right. Thank you very much. Phil, thank you. Mary Barr, thank you. And Steve, sure, thank you very much. We appreciate your time today, everybody. Good to be with you. Well, coming up, a semi-snaffoo. Intel scrapping its multi-billion dollar acquisition of tower

semiconductor after failing to get regulatory approval. We'll get the key details when power lunch returns. Intel hitting a snag and its plans to enter a faster growing part of the semiconductor industry, the foundry business after scrapping a deal with Israeli chipmaker tower semiconductors. Christina Parts and Evelace has the details in today's tech check. What happened? Well, let's just say Intel had to wait 18 long months, patiently, patiently. And now it's mutually, and I'm using mutually in quotations because that's what they said. They agreed with Israeli Foundry Tower Semiconductor to terminate its plans to acquire tower.

But this failed deal is really about China's regulators refusing to play ball amid rising tensions with the United States. Intel derives over a quarter of its revenues from China. In other words, it has a strong presence in the country employing over 12,000 people. Regulators have the right to review any mergers of companies like Intel that earn a certain amount of revenue in China, much like we have here in the United States. And that's why you're seeing Tower semi-share is by tanking down almost 11 percent, Intel down 2 and a half percent. Not as bad as a reaction. But overall, China, we know this. We talked about it, is not happy with the American-led set of international restrictions on the sale of.

of advanced computer chips. This failed acquisition is just a way for China to fight back, just like it did by blocking the sale of micron chips to certain Chinese infrastructure products back in May. Today's block deals sets a precedence for any other American firm that derives revenue from China and wants to get involved with any type of M&A activity. This also disappoints prospects for Intel's foundry business.

Tower semi is small, less than $2 billion in revenue, and it has 1% of the market share for total foundry revenues. You're seeing on your screen there, that 1% just on the top left. Taiwan semi on the right side for contacts takes up 58%. Samsung 8%. Intel isn't even on that pie chart yet, and that's the problem. Losing the Tower semi-deal would not move the deal massively, according to analysts on the street, but would have given Intel some more expertise in running a foundry and as well lagging nodes,

which is just really chips used in, let's say, the auto sector, for example. And so now Intel is caught in the crosshairs between the United States and China and really just has a $353 million breakup fee. Why did the deal fall apart? What happened? Well, it's because of regulators. There's the regulators.

Yeah, Chinese regulators. They kept delaying it, delaying it, and then 18 months later, they decided, they were mutually going to agree to just kill the deal. Because there's no point in waiting and putting all this money in there. So, Intel's... Waiting for approval from the Chinese who were not on a good foot with the U.S. right now. So if Intel doesn't get this business and they still need to figure out how to get into the foundry business, what else are they going to do?

Intel is already getting into it. the Foundry business. They have this whole model that they're calling the Intel Foundry System IFS. And they have signed on clients like media tech, synopsis, which the earnings are out after the bell today, a few others. And so that is where

Intel wants to move forward. Two weeks ago, I interviewed Pat Gelsinger, the CEO, and he talked about AI and how Intel can capitalize on this massive push to spend on AI by building and creating the chips that are going to be needed. So they may not be designing it and

They're not going to be like the likes of Nvidia, but they were contract them out much like TSMC does. And so that's what Intel wants to do. They are putting a lot of effort into this business for the goal of five new chips in the next four years, which is a lofty goal. And it seems like they're on the path, but we know Intel has failed in the past. So there's a lot of skeptics out there that may be a little bit more reluctant to say that this is a win or a loss or like, why even own Intel? That's what Mazuho said. Who owns Intel?

Yeah. Christina, thank you. Thanks. Good to be with you. All right. Still ahead. Checking the charts, we asked our technician to give us the lowdown. On some key movers, we'll get some technical support when Power Lunch return. All right, welcome back, everybody. Time for some technical support on Power Lunch. We're going to take a look at some big market movers. And here to chart some of those names is Piper Sandler's chief market technician Craig Johnson.

Let us begin with InVIDIA, the stock slightly lower Craig today, but still up 7% this week. a bit of a pullback. Stock has tripled so far this year. You can't get too greedy here. Well, you know, Tyler, it is the biggest winner of the year in the S&P 500. And when I look at this particular chart, we've had this great big topside breakout that you can see here on the chart. And right now, this sort of little pullback in here just looks like to me to be sort of a bull flag pulling back just a little bit. We've got earnings coming out next week. We still think there's upside. This is the leading play for AI at this point in time. And we still think that any sort of pullbacks in here should ultimately be bought.

Does it trouble you that it broke below its 50-day moving average? If I'm reading the purple number, correct? It matches my tie, doesn't it? You like that? I mean, it is good. It is good. What I do notice here is that we broke below the 50-day moving average just briefly right here.

But since then, we have come back and we have recaptured that. We've got earnings next week. Our fundamental analyst, Tyler, is really constructive on the chart. He's got more than a, I think he's got about a $500. target on it, so there's still more upside to go. We think in this, again, semiconductors, their leadership in the market. It was a market darling a couple years ago,

then it wasn't last year. Now it is a market darling again and hard to bet against it. Let's talk about Abercrombie and Fitch, another recent winner, up 80% in three months. How should we trade this ahead of earnings next week? Yeah, ahead of earnings next week. The first thing as a technician is I'm going to be looking for this sort of downtrend reversal right through here.

We've done that. We're also trading back above the 50-day moving average. 200-day moving average, and we think we're setting ourselves up ultimately to go back and retest these old highs back up here at these levels. So from our perspective, Tyler, still more upside to go. We don't follow this one fundamentally, but I got to tell you, as I go through and I look at the consumer cyclical and discretionary space, I'm starting to see more stocks starting to improve. It's not just the home builders. It's a lot of these kind of names that are starting to show signs of improvement.

I think that's a good sign for back-to-school activity. Yeah, and Courtney follows this one heavily. So she'll be talking about it next week. I know that. On the other hand, we've got Moderna down 14 of the last 17 sessions, hitting $95 to share earlier today. First time since Thanksgiving of 2020. Let's take a look at Moderna.

I mean, the chart here is, from our perspective, broken. You can see that you're still making a series of lower lows, lower highs. We're back below this declining downtrend. We've broken below the moving averages, Tyler. in a market that is only a single digits off of its all-time highs, this is not a stock that a portfolio manager can own at this point in time. I know our analyst, Ted Tenthoff, is very bullish on it. He's got a $200-sum-dollar price target.

But when I look at the charts, it's a pass for me at this point in time until I see a trend change. I'm going to throw a curveball at you. We were talking last night on Fast Money about a couple of stocks, Microsoft and Apple and the technicals on those two. You have any thoughts there? Yeah. I mean, when I look at a chart of Microsoft and, Apple, I think what is happening is that both of those names, they've been among the magnificent seven that we've talked about here on the shows for months and months now.

They look like they're just sort of getting trimmed. A lot of the portfolio managers out there have a problem where they can only own certain percentages of like their top 10 names. And Microsoft and also Apple are such large percentages of these indexes that they're going to have to be trimmed. Now there's Microsoft and you see it. Correct. And there's Apple.

today, year-to-date up 36%. You can't complain about that. But pulling back, as you see there, after the cell phone sales. This just looks like a temporary setback. But what I think is going to happen with these large-cap stocks is they're probably going to consolidate,

have a time correction in here for a while. And I think as that happens among those magnificent seven companies, you're going to start to see that money come out of these large-cap names, come down-cap, and it'll be very good and very healthy to broaden out the overall market. So mid-small cap, I think we'll have a very strong second half.

I'm really troubled by the fact that they're keeping us apart. So I'm going to come over and hug it out with you, man. I appreciate that. It's great to see you again. Thank you for coming. Thank you. You got some guns there, man. That's good.

We tried to get into the gym and work out in a while. Good to see you. Good to see you. Hi, thanks a lot. Court. Thank you. Hi, guys. I'm over here too.

Anyway, we only have a few minutes left, but lots of stories we still want to get to. And someone who's been a longtime friend of Power Lunch. Everyone's talking about him today, Oz, Perlman. We'll join us for closing time when power lunger turns. We only have about four minutes left in the show and a bunch more stories you need to know. So let's get right to it. Apple is reportedly beginning production of the iPhone 15 in India as it seeks to diversify its supply chain away from China. The move comes as relations between the U.S. and Beijing grow more and more tense.

Lots of companies obviously doing this. Apple still very, very prominent in China, seem to have good relations with the Chinese, but it makes perfect sense that they would diversify here. The coupling seems to be maybe a bit of a problem for more of these companies. Or another change coming to X, the company formerly known as Twitter, the service formerly known as TweetDeck. This program formerly known as Power Lunch. The TweetDeck is now going to be called X-Pro.

There are a lot of X-Pros. But here's the sticking point for X-Pro users. It will no longer be free. It will only be available to Twitter Blue subscribers, which is now called X-Premium. It costs $84 a year. It's hard to keep track of this. Are you confused yet?

And the blue check mark thing really confuses me because I think, oh, it's a blue check mark. And then I click on it and the person is like 64 followers. And then I'm like, are they even free? I'm very confused about these changes. Okay. So bring out the world's smallest violin. Around 3.5 million people around the globe lost the title of millionaire last year. 1.7 million here in the U.S.

meaning for the first time since 2008, the rich didn't get rich. Yeah, I guess it was a lot of stock market wealth declined yesterday. Yes. Last year, not yesterday. I was like, whoa. Yesterday? No, last year. And that probably was what was handicapping. That did it. That did it. But we'll see what the Fed does. And if we can bring it back. Well, let's check on our stock draft standing, shall we? WWE superstar Charlotte Flair, commanding lead. Thanks to her top pick. We talked about it a minute ago, InVIDIA, up more than 40 percent since draft days.

The New York Jets linebacker, C.J. Mosley, however, is downside. slightly with his picks of Procter and Gamble and Goldman Sachs, but Mosley may have gotten some draft advice from a former contestant. Last night's episode of HBO's Hard Knocks was really fun. It was great with the New York Jets featured mentalist O's Perlman. He stunned Aaron Rogers, C.J. Mosley, and the team lit some mind-blowing tricks. So we wanted to check in with our old friend, O's Perlman, joins us now. How did that come about, O's?

That was a fantastic segment that they had with you. Thanks, Tyler. Thank you, Tyler. Got to show some love to ESPN, Adam Schaefter, who all helped make it happen. We've been doing this for a couple seasons now, and there is a lot more to come. The Jets was the tip of the iceberg.

So I'm teasing the fact we got a lot more teams coming up. And this was part of just sort of mental training. It was also, it wasn't just you doing your mentalist thing. It had a point for the team. Absolutely. Team building, morale building, team cohesion. I mean, they're in training camp. and you want those shared experiences

that are going to really unite this team to hopefully have a winning season. And that's what I was there. I get inside people's heads. So I'm showing them how I get inside their own heads. That was one of the scenes. One of the scenes was you turned a deck of cards that Aaron Rogers was holding.

There he was holding the cards. You turned it into a goldfish. I don't know how you did that. You asked one of the other players, I'm not sure which one was to think of a, look to a card and think of an animal. The animal was a goldfish. I mean, it was just bloody amazing.

I'm telling you. Well, thank you. I got to come back and blow your minds one of these days again. I've already been in your head before, Tyler. It's Courtney's turn. I know. Now I'm nervous. I'm sorry.

O's is. I said, Oz. I know it's. Stunning. You know, it's been a day. It's a tough name. It is stunning. Well, O's continued.

Good luck to you. How are you doing on all those marathons you run and all that stuff? I'm still running. I'm still running. I'm still running a lot. I've ran 20 miles this morning. Thanks for remember. I'm not at it.

Oh, my God. Those 20-milers are tough, man. I dreaded that. I know, you're a marathoner. Oh, it's great to see you. Congratulations on a real tour to force last night on H.B. You guys are the best. Man, I love to get us. Thanks for watching.

Power Lunch, everybody.