Power Lunch - Power Lunch 6/17/22

Episode Date: June 17, 2022

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

Welcome to Power Lunch, everybody. Kelly, what say we go down and join Kate at that table at that $50,000 a table club? Welcome, everybody. I have no crypto to spend. I'm Tyler Matheson. How quickly things turn. The S&P energy sector falling more than 20% from its most recent. That's energy, folks. The hottest sector of the year. Now in a bare market, like so much of the rest of the market, we will break down the sector and the moves in those stocks. Another sector that is changing fast, that would be housing mortgage rates rising at the fastest pace since 1987. Our cracks starting to form in housing. We will tell you that story, Kelly, later this hour. And it feels like Miami even up here today, so hot, so humid outside. And even heating up a little bit for the markets, the Dow is on pace for an unprecedented 11th down week in 12.

The S&P, 10th weekly loss in 11th. These things have never happened before. The NASDAQ on pace for a not, also about a ninth weekly loss in 11 for the first time since 2002. But we are seeing some green here across the board, especially on the NASDAQ in the final hours of trade. Now, the price of oil, look at this as it continues to accelerate to the downside. We're now down almost 8% on WTI crude or about more than 10% this week, snapping a seven-week wind streak. WTI is back to 108 a barrel. A lot of people watching this for key reversals in the energy.

space, but also in inflation and interest rates, even in the broader market. On that note, let's go over to Dom Chia with a look at the sudden and sharp decline we've seen, Dom, in the energy stocks. So it's crazy. As Tyler mentioned, this whole idea that you could see the energy sector overall, excuse me, fall by that much in just seven trading sessions. That's how far it's fallen. 21%. If you kind of look at the way that things have shaped up, losing energy is the way we're talking about because over the last year, this is the energy sector spider. One of the big ones that tracks the energy sector overall, Kel. I mean, from the lows that we saw back kind of last August up to the highs, you're talking about more than a doubling in terms of

price overall. So what does that bear market look like, so to speak? Well, that's right here, because from that top that you're seeing there all the way to the bottom, that's 21% overall. And that's the reason why you're seeing at this point here, some of the oil and gas exploration and production companies, they're the ones that have some of the worst performances overall. They're down about 24% from the highs that we've seen so far. The energy stocks, bottom line, have taken it much harder than oil prices themselves, the commodity itself. Now, among some of the big exploration and production companies, the notable ones, the ones that we talk about often, that have seen that big fall from grace. Each of these stocks has now hit at least a 52-week high just in the month of June.

And within that group, Devon Energy, you can see they're down 28%. EOG resources, down 25%. Now, we get to some of the bigger names, the integrated oil names, like Conocoferfer. Phillips, a quarter of its value loss. But I want to highlight the relative outperformance and big names like Chevron and Exxon over here. The reason why is because they are only, and I say this a little bit tongue and cheek, only down between 18 and 19 percent, as you can see here. So as we talk about the pullback and energy, there are some traders and investors who are still looking towards the mega-cap, really large, integrated, upstream and downstream names, the ones that extract

the oil from the ground and then turn it into fuel as a way to play these names. So if you still favor energy, like many investors do when it comes to the value trade, they are often looking towards names like Exxon, Mobile, and Chevron rather than some of the smaller E&P producers out there. Well, we are going to meet somebody who has a couple of energy trades in their picks today. Let's find out our next guest has an energy name or two on his buy list. Largely because of the dividend there, let's bring in Michael Clarefeld, portfolio manager for Clearbridge Investment. Michael, welcome. Good to have you with us. Let's talk broadly here about what Dom was just talking about. What is your hypothesis as to why these energy names, a lot of them are the exploration names, why they've fallen so much so quickly?

Well, I think energy has seen a huge move, obviously, up in the first half of the year, which was driven by fundamentals, which were in place before the war with Russia's invasion of Ukraine, and which have only become exacerbated by that. I think it's not surprising there's some profit taking, but we actually think the fundamentals remain pretty robust, and we're particularly focused on natural gas. Natural gas prices have moved up a lot in the last six to nine months. And I think in the last couple weeks, investors have been very focused on this LNG facility on the Gulf Coast that went offline, reducing the amount of gas that's going to be exported for the next couple months, and that's weighed on short-term gas prices. But while that's been happening, longer-term gas prices, so if you look at the forward curve, looking out a couple years, they've actually continued to move higher. And what that reflects is that

we've had restrained gas production in the United States, and we have more global demand for U.S. gas. And so what we see is, and really our focus today, where we're most focused on the pipeline companies, Williams, which is natural gas pipeline company, is sold off probably 15 or 20 percent in just the last two weeks. And yet it offers a five and a half percent dividend yield, which is going to have terrific growth in the years ahead, driven exactly by what we're talking about. talking about, and as a pure play natural gas company, we actually think has a powerful role to play in the energy transition, and it's actually going to be sort of an ESG winner, as investors realize that within fossil fuels, natural gas plays a critical role.

And another one is Enbridge on your list? Yeah, so Enbridge is another best in class North American energy infrastructure company, and it yields about 6.5% today, which is a solid, well-covered dividend, and again, that we expect to grow in the mid-single digits. they have nice growth coming from the same dynamics I talked about on the natural gas side. Embridge is also one of the largest oil pipelines in North America. And what we think is particularly impressive about Williams, particularly attractive, sorry about Embridge that's particularly attractive is over half their revenues are explicitly tied to an inflation escalator, to a PPI adjuster.

So as inflation is going up, they're actually just raising their earnings in line with inflation. Correct me if I misheard you. I thought when I asked the first question about why energy is coming. down the way it has, the energy stocks, that is. You said that the fundamentals in the market remained pretty much as they were two weeks ago. So if they haven't changed, what has? Is it just sentiment? Is it, you mentioned the sort of catch-all phrase, profit-taking? Yeah. So I think what's happened is obviously with the recent Fed meeting and with people focused on rising rates and the impacts that's going to have on restraining the economy, I think people are more concerned about the demand

side of energy and appropriately so. But I think we make a couple observations. One is that energy demand generally actually is not that elastic, right? People primarily use energy for things like heating their homes, cooking, driving, things that actually tend to be relatively inelastic even when the economy weekend. So there'll be some weakness, but not a ton. And the other thing we'd focus on is that we think what's really driving so much of the strength and energy has nothing to do with demand and has to do with really almost a decade of dramatic under supply, of a dramatic underinvestment in the supply side of energy. So on a global basis, energy companies have not been investing much in new production the last five to seven years, in part because of the economics, right? Oil and gas

rolled over several years ago. A lot of these companies got in trouble and feeling sort of chastised, decided that they were going to be more conservative, not invest as much. Then you compound that with ESG, which is society and investors kind of saying, hey, we don't, we don't want to see so much growth in fossil fuels. And you've had a real reduction in the investment side. So we believe that the real driver there is more about supply than demand. And I guess that's why we say not much has changed in that regard. And that's it, Michael, though, is it possible? Is there any reason why crude couldn't settle in the $80 to $90 a barrel range, everything that you said still being true? So I think that's absolutely plausible. And I think a lot of us, a lot of people get focused on what's happening in the spot market.

But I think most investors should be looking a little more at the forward curve. And when we say that, mean is the spot market obviously is where oil is trading today. But if you look out where oil is trading a couple years out, it's trading in the set in the 80s. And actually what we would argue is that that's actually a really healthy price for oil. And so in the short term, while clearly as spot prices come down, that will weigh on sentiment. And it's not, you know, when you see oil down five or six bucks in a day, it's not surprising the oil equities are going to be down. But longer term, what will drive the earnings and cash flows and really returns these companies is that forward price. And we still see a very attractive

forward price environment for both oil and gas. And so that's why we remain so constructive on them. Yeah, and there you do see West Texas crude down probably what, $12, $13 a barrel, well, nine today. So that partly explains what's going on. Thank you so much, Michael. We appreciate it. Have a great Father's Day. Good weekend. Michael Clarfeld.

My pleasure. Take care. Fresh volatility injected into the market this week after that 75 basis point rate hike by the Fed, also raising the risk of recession, has Walsonson. Street reached a be careful what you wish for moment. CNBC contributor and Schroeder senior advisor Ron and Sana is out with a new op-ed, warning that current market conditions indicate something is about to break. Ron, been looking forward to this all week, my friend, where, as the dust settles, what do you think about the landscape?

Well, Kelly, as you well know, we've already seen some areas of the economy start to break, whether it's housing, and we've seen that across every housing metric that exists right now. Now, whether it's the crypto market, whether we're seeing strains in the European sovereign debt market, whether seeing Japan struggle with its own policies against a tightening federal reserve, you know, something at some point has to give. And the market's gone from pricing and rising inflation to the risk of recession. So these are these pain points at which, at least in the past, the Fed has, if not stopped raising interest rates, taken a pause, reassessed.

And so I think this notion that it's everything is on the table with respect to raising rates. I think that's true up to a point all other things being equal, and I just don't happen to think they're equal. We had David Kelly on on Fed Day run, and he said the classic mistake of feds through time immemorial is the idea that they wait too long, then do too much for too long. Is that a possibility here? Well, you know, with all due respect to individuals who make statements like that, they were among the people who were suggesting the Fed needed to do much more in order to rein in inflation, even though the visibility around supply disruptions around the war in Ukraine, the lockdown in China, were obviously complicating the picture dramatically. And so we've heard

a host of academics, Wall Street economists and others say the Fed should have gone earlier. They should have done more. They should have raised rates 100 basis points. Yeah, but that's so easy. I mean, a year ago, most people, I've got to say, most of people who are coming on here, were using the word of the year, and that is transitory. They were not, not, not calling on the Fed to move right then. Maybe by the end of the year, some work. And, you know, if you look at Larry Summers and some of his acolytes, they've been suggesting that the Fed was behind the curve.

You know, and in 2020 hindsight, not knowing, again, at the time what we know now, it's very easy to say that the Fed waited too long and then should do too much. Now that the Fed's done too much, they criticize them for going too far. I think there's, you know, the amount of Orwellian double speak in the economic community right now, I think staggering. And I think that we're at a point where something like 94, 95, like 97, 98, where something could go wrong that would force the Fed's hand and cause them to stop doing what they're doing at the moment. Ron, so what should the Fed do now? I mean, what do you think is going on? And what should investors do?

Well, I don't, listen, I think, you know, if we're getting closer to the point where the Fed can't get the terminal rate above 3%, and maybe has to stop closer to two, you're going to have a big buying opportunity in long duration assets, whether that's bonds or stocks. That will come around. But again, it has to be fairly obvious that something's broken. And so, you know, you saw this emergency meeting of the European Central Bank yesterday trying to figure out how to cap interest rates for heavily indebted countries like Italy while it's tightening monetary policy at the same time. You know, good luck with that. So I think if we get one of those moments, whether it's in crypto, whether it's in European sovereign debt,

whether Japan struggles trying to support the yen, or something really goes off the rails market-wise. Then the Fed stops. Then you buy equities, you buy bonds, and we kind of restart the cycle, at least for a period of time. It's what we saw, again, in 95, in 98, and in other cycles like 2003, where the Fed had to reverse course and start,

if not start easing. Certainly had to stop raising rates. Talk to me a little bit about bonds. I was with a panel last night, And as bad a year as it's been for equity, stock owners, as bad a year as it's been for crypto, it's been a bad year for bonds. Yeah, Financial Times has a really staggering piece out today about how the performance in long bonds in the U.S. are the worst on record in the first six months of this year.

We've seen junk spreads on average go out to over 500 basis points, and there's $100 billion worth of junk debt. And David Faber was talking about this this morning, that yields 10 percentage points more than comparable treasuries, putting that debt in distressed category, if you will. Carl was talking about it as well. And so you're getting to that point where default rates could be, default rates could risk could be rising and other what we used to call event horizon risks might be out there that the Fed will have to take into consideration at some point, whether or not it wants to.

And if you go back history, Tyler, you've not been doing this and Kelly as well. But if you go back long enough, you've seen these stress points where the Fed was decidedly intent on raising rates to correct a certain situation and then was forced to stop. That may not happen at the next meeting, but I would argue before the end of the year, they're going to reach a tipping point where they have to make a decision about whether or not, at least, at the very least, to pause. And if you hear that word pause or you sense it's coming, what do you do? You buy everything in sight that's on the risk curve.

You bet you're, you know what? Well, Bippy, I believe, was the word way back. God, there's a guy remembers Rowan and Martin's laughing. All right, Ron and Son, have a great father's day. You too, my friend. You too. Coming up, stocks are about to close out their worst week since the start of the pandemic, and the selling may not be over yet. A top technician tells us where the S&P is heading and names a one-time pandemic darling about to break out.

Plus, if you're seeking safety, we have some health care names to consider. We'll get into that. As we had to break a look at some of the grocers led lower by Kroger today, which had its price target cut at BMO. Kroger on track for its worst week since March of 2019. We're back in a couple. Welcome back to Power Lunch. It's been a brutal week for stocks with the S&P heading for its worst performance since March of 2020. Our next guest says the downside risk remains elevated, but it is pointing to two names that could be bright spots for investors.

Craig Johnson is here. He's Piper Sandler's chief market technician. Good to see you, Craig. So you're a little cautious overall still? You know, we've been cautious here for a while. Still think there's more downside to go, Kelly. And when we just simply pull up a chart of the S&P 500, you can see a pretty clear, you know, top formation that has been formed. And when we measure that out as a technician would, it would suggest at least another 5% downside. And kind of the level we're circling in here, Kelly, is around 3,500.

We think that's probably where we can find some footing in here. And Kelly, at these levels, here are some stats that I find absolutely amazing. We've got only, we've got less than 10% of all the industry groups that we follow that remain above a 40-week moving average. We've got single digits in terms of stocks that are in any form of an up trend in our work. And we've got nearly 80% of the industry groups that we track that are making 26-week new lows. So you've got to look at this and say how much is priced in. Right. And clearly quite a bit has been.

I mean, it sounds to me almost like capitulation. And like you're saying, even the bottom, we might be only 200 points away here. So those with a longer horizon might feel fine buying. I mean, let's take two emblematic examples that might surprise people. Zoom and Ollie's are both popping up on your charts. What do you see there? Well, I mean, Zoom is the pandemic round trip is what we should really put this one as a poster child. It's plunged over 80 percent since the October highs.

And at this point in time, I'm not sure how many sellers are really left. And we've come right back to a very large area of support here for Zoom at this point. And from our perspective, I can see on the charts a nice downtrend reversal. We've moved back above a 50-day moving average. And it looks like we can see it move back up to it about 174. So not a bad move from where the stock is trading at right now, right around 107. So right now, your sort of next level to watch on the S&C, P is 3,500. If you spin back the movie six weeks ago, what was your level to watch then?

Spending it back six weeks ago, Tyler, it was 3,500 of what we're looking for. And then let me just add to this. Interesting. I agree with our prior guest you had on that if we get any indication of softening from the Fed or pulling back in these rate hikes, this market is going to go a lot higher. I'm not changing my year-end price objective of 4775 because I don't think we're going to see a lot more downside. And I think eventually when there's a Fed pivot or we start to see some improvements here, this market is going to work its way higher nicely. So let's turn then back to Ali's. Let's talk about energy as well. Actually, you know, Ali's, I assume, are you also bullish on, Craig? Absolutely. I think Ali's is going to be a very nice.

company to be buying in here right now. It certainly looks like a bargain at this point in time, a lot of $3.6 billion market cap company. You're seeing decent revenue growth. The margins have been stable, slightly improving. And from the technical setup, I've got a nice downtrend reversal. We're moving back above our 50 and 200-A moving averages in here. And the next resistance level is going to come in around 7350. So not bad when the stock's trading at 57 now and also putting up good relative L-performance versus the S-P-500. Sure. And let's highlight what you're saying about energy here

because we're starting to see a raft of bearish calls piling onto the sharp downward move, but you would still be a buyer here? Absolutely, I would. When I go back and I look at long-term charts on the energy sector, we are literally reversing 5, 10-plus-year downtrend reversals for many companies inside of the energy space. If I take the XLE as just an example here,

we've had some overbought conditions clearly lately, but it hasn't changed trend. And in my world, unless we're changing trend, I'm going to stick with that trend because I think it's the winner. And I still see the positive relative L-performance happening in the energy patch. And I still think energy is going to be leadership. And I want to stay in front of the leadership parts of the market right now. All right. Craig, good to get your perspective today. Thanks. Thank you.

Craig Johnson. Very interesting. Very, very interesting. All right. Further ahead on the show, the economy is getting homesick investors pouring out of real estate ETFs. Prices for each part of the home, each part of the building parts of the home, climbing higher due to inflation and with rising rates, could the mortgage market be on the verge of a real break? We will break it down for you. But before the break, throughout the month of June, we celebrate Pride Month. Here's Julian Woodhouse, Woodhouse Army founder.

Making sure that people never feel alone is so incredibly important because it's something that when you're growing up and you're in the closet or you come out of the closet, you're not in an environment that's extremely supportive of you. It can be really lonely. And I think I'm really proud of our community for being so inclusive and so warm to all of us because we all need each other at the end of the day. All right, welcome back to Power Lunch, everybody. Time for a weekly ETF tracker. We focus today on real estate ETFs, $682 million worth of outflows in the past week ending yesterday. Obviously, the main driver has been a rising interest rate, which has led builders to getting bearish on sentiment, a souring sentiment, as we say right there. And a huge drop in demand for mortgages is their way down.

The Vanguard Real Estate ETF, you want to see some bad numbers? All right, you're going to see them right here. 5.5% right now for the week. Same for the real estate sector spider. It's not about 5%. Look at mortgages. Now, the real estate is different. You've got mortgage reits and mortgage reed

ETFs down 13% there. And the Vanek mortgage rate about 14% as well for the week. The data comes from our partners at Track Insight. More information available on the F.T. Wilshire ETF hub. Meantime, let's go to Dom Choo. for the CNBC News Update. Is there anything true doesn't do? Tyler, it's the dead of the summer,

so we got a lot of things we'll be doing, I'm sure, cross-platform-wise. So anyway, the House's January 6th committee is now saying it is cooperating with the Justice Department by sharing transcripts of its interviews. Now, two days ago, the DOJ sent a letter to the panel saying it is critical.

It gets that material. Yesterday, the panel's chairman was non-committal on the matter when asked about it by reporters. Amid widespread expectations, the U.S. Supreme Court is preparing to overturn Roe v. Wade this month. The Iowa Supreme Court cleared the way for lawmakers there to severely limit or ban abortion outright in the state. It reversed its own ruling just four years ago that Iowa's Constitution protects abortion rights. And U.S. airlines are canceling a lot of flights for a second straight day.

Almost 3,000 flights have been canceled just since yesterday, according to tracking. service flight aware. Airports with the most cancellations are those in Charlotte, North Carolina, along with LaGuardia and Newark Liberty here in the New York metro area. Carriers are blaming bad weather and a shortage of pilots as the reasons for those cancellations. Kelly, I'll send things back over here. Yikes. All right, Dom, thank you. Still ahead on power lunch, looking for some insurance amid the market volatility? Health care and biotech names are higher today. And our next guest says some in the group could be good safety plays. Plus, failing the test of time. We'll break down the stocks that have seen their valuations return back to pre-pandemic levels in today's three-stock lunch.

We got about 90 minutes left in the trading day. We want to get you caught up on all the market activity, stocks, bonds, commodities, and where to find opportunity and portfolio protection these days. I'm going to guess we're going to go to Dom Chu. Domchoo on the markets. All right. So, Tyler, let's begin right now with what's happening, given the week plus that we've seen in terms of downside volatility. some of the bulls and maybe long only investors,

probably just a little bit relieved. We're going into this weekend, possibly to the upside, capping off the worst week of the markets since March of 2020 during the pandemic sell-off. We're going to cap it off, possibly on a positive note, if we see these gains hold.

Of course, we've still got an hour left of trading today. Things are tilted, as you can see, towards the higher end of a relatively calmer action day. The Dow has been as high as 240 points, as low as 274. Now, the notable bounceback for now is the NASDAQ, up of a percent and a half, almost 2 percent at this point after losing 4 percent, of course, yesterday.

The three key sectors that are leading the way, communication services, discretionary technology, those three sectors, again, worth nearly half of the S&P 500. It's a reversal of yesterday's action. Stocks like N-phase, Norwegian cruise lines, American Airlines, Etsy, and Cesar's Entertainment are among the biggest gainers in the S&P today. You may recall they were among the biggest losers yesterday. And then consumer credit companies like American Express and Capital One, also high up on the leaderboard, thanks in part to an upgrade to outperform by analysts over at Baird.

They see the selloff as now pricing in a worse consumer spending backdrop and could provide an attractive entry point for those stocks. Now, on the flip side, the bigger consumer staples names like Kroger, Walmart, Kraft-Hein's, Archer Daniels Midland, under some more pressure today after being relative outperformers yesterday. So a bit of reversal tie. I'll send things back over. All right. Thank you very much, Dom Chu. You know, I'm going to turn now to Rick Centelli, and I've been thinking that we should end our weeks with Rick's riff. And I'm going to ask you, you can weave in whatever you were going to say in your report, but I'm just going to throw this one up there for you to spike.

What have we learned this week, Rick? What have you learned? Ah, boy, Tyler, that is the perfect question because I actually have the perfect answer. Here's what I've learned this week. That no matter how you squeeze a water balloon to try to mold its shape, okay, it pops out somewhere. else. And that same analogy should be applied to central banks. Central banks have tried to manipulate to massage, to push and pull interest rates to where they thought they should be, only to learn that ultimately they can't control markets, they can't control interest rates,

and they certainly can't keep investors from moving their money from areas that they don't think can satisfy the risk-reward parameters. Case in point. Let's look at all the 10-year yields across the globe year to date. Here's our 10-year. It closed at 151. It's up 171 basis points. Boons, they're up 184 basis points. The 10-year guilt in the UK is up 153 basis points.

The Japanese yen, of course, we know the problems there. The Japanese government bonds is the big reveal here, because they settled at seven basis points, and they are now, get this, at a whopping 22 basis points. So they're up a total of 15 basis points. So what have I learned? I learned that you can manipulate those interest rates, Bank of Japan, but it comes back to haunt you, and here's where it goes.

Let's look at a chart of the dollar yen, going back to 1998, because it's virtually at a 24-year low. How did I do, Tyler? Right? I loved it. I loved it. We're going to make it a date every Friday. What Santelli learned this week?

Sounds good. All right, my friend. Have a good weekend. Happy Father's Day. All right, let's move on. Big declines for energy stocks. Oil, big declines there. Back to $107 a barrel.

$107 a barrel. Sounds like a relief. Pippa Stevens, but not all that much. Yeah, hey, Tyler. It's hard to follow up Rick's Rift, but there are some big moves to get through in the energy complex today. So let's start here with oil falling about 7%.

It's now down nearly 10% on the week, snapping a seven-week winning streak. The macro concerns really hitting oil today as the market reevaluates what a slowdown means for demand. And the stronger dollar definitely not helping things. WTI is down 7% at 109.44. Brent down 5.7% just under 113. Turning to Nat gas, that's down more than 6%

right around $7. Yesterday, it was above $8. And for the week, it's now down more than 20%. And we can compare that to European natural gas, which is up nearly 50% for the week. Now, moving over to gasoline futures, that is falling more than 5% and down about 9% on the week. A lot of moving parts here,

but that could point to some relief at the pump with the national average right around $5,000, according to AAA. That is down slightly from $2.000. Tuesday's record high. Then looking at energy stocks, which just briefly dropped into a bare market just now, before we're covering slightly down up here about 20% from the recent high on June 8th. But one bright spot, though, is Energy Tyler today is solar stocks. The Tan Investco Solar Fund up more than 6%, although still in the red for the week. Back to. We got Rick's Riff and we got Pippa's Pep Talk, thanks to our producer, Gino, the human Gino. All right, let's move on. Concerns about

inflation and Fed tightening may be spooking markets, not this guy, not Chad Morgan Lander. He's not spooked at all. Chad, welcome. How are you, ma'am? I'm doing well. Thanks for having me on you. You're not spooked, are you? No, I'm not.

You know, this is a process that we go through. The economy is decelerating. Your probability of recession is going higher. You want to be in staples as well as in health care. I think that health care companies in particular can do quite well in the second half of 2022. So we're overweight healthcare. So that's sort of a safety play, isn't it, Chad? I mean, traditionally it has been.

It is a safety play when you have a probability of a recession and if recession, if the economy destabilizes. But overall, these are companies that even if there isn't a recession, we believe the valuations and organic growth are going to be quite robust, and we could see these companies go quite high. Valuations on health care right now is roughly about P multiple 15 times. So they're ripe for perhaps a good return. And so we have three names in that area. One is Pfizer. Two is J&J. Three is Medtronic. So take me through. And they also have nice dividends, which is what what seems like every financial advisor we talk to is stressing today.

Absolutely. We run a dividend growth portfolio, and for example, Johnson & Johnson has a dividend above 2%. The dividend growth is going to be between 6 and 7%. They're splitting the company into 2. So you could see an unlock of shareholder value there in 2023. The multiple is not too expensive at roughly 16 times again. They have a ripe pipeline and a quite robust pipeline on the pharmaceutical as well as the MedTac side. So we'd be overweight Johnson & Johnson.

Another MedTac name that we like that has had short-term issues, regulatory as well as supply chain issues. But this is a really terrific opportunity to get a great company at a really, reasonable price. And that's Medtronic, trading out a forward-looking multiple of 14 times, very little debt on its balance sheet. We think that over the next three to five years, revenue growth could be 5 percent, earnings growth of 8 percent. Again, just a real nice blue-chip company on MedTech side. And then there's Pfizer, of course, multiple below 10 times right now. Do in part because of the COVID property, their revenues have gone up. over $30 billion in the last two years.

But we think that as they show some progression within their pipeline, we can see good, strong organic growth and revaluation of the actual stock from a P.E. Multiple below 10 to 12. You mentioned regulatory issues with Medtronic. And as I recall, there may also have been some liability issues. They may have been resolved. But there certainly have been lots of product liability issues with respect to Johnson and Johnson. big ones that are ongoing ones, multi, multi hundreds of millions of dollars in settlement costs.

Is that a risk with this sector that investors need to really take into account, or are those risks fundamentally a cost of doing business for pharma companies, for medical device makers, and the like? Well, that's a great point that you're making. We believe, as well, that is a risk, but is factored in. to both of these companies' valuations. We have included over a $20 billion type of liability for Johnson and Johnson and still continue to believe that with that liability, that the multiple is quite attractive.

But once again, you not only have that type of liability, but you also have liability regarding pricing disputes with the U.S. government, and that always is a major concern. But we think that if you look at three to five years, all three of these companies, Tyler, that you could be handsomely rewarded and also get a rising income stream overall. I'll see you running around the streets of New Jersey, Chad, in my neighborhood. Good to see you, man. Absolutely. Good to see you as well, sir.

Have a nice father's day. That's Chad Morgan Lander, Washington Crossing, Kelly. After the break, we're breaking out the housing cost calculator to show you how much prices are rising for every single aspect of the home. We'll be right back. And as we head to break, remember, you can now listen to Power Lodge on the go. Look for us on your favorite podcast app. Follow and listen today. Welcome back, everybody. Today we continue our housing cost calculator. It's our special series. We run through each part of the home to see how much prices have risen in just the past year as inflation has really taken hold. We'll take you through two more rooms today, starting with the bathroom.

Those tiles, those costs are up 15 percent. Vanities are up 14 percent faucets. are up 13%. Industry insiders saying, quote, projects in general are often 30% higher than a year ago because the average labor cost increase, that is 18%. So that's the bathroom. Moving on to the next

area, the bedroom. Mattresses are up 8% in price. Bedroom furniture broadly up around 13% if you can even get it. Clocks, lamps, and other decor up around 6%. So there's some moderation. Next week, we will take a look at the living room and the backyard.

Clock prices going up by 6%. That's amazing. That's your one source of non-double-digit price pressures or clocks. Along with those rising clocks of costs, rising rates are causing many to ask whether housing could be facing another foreclosure crisis. Diana Oleg has more on that. Hi, Dai. Hey, Ty. And the short answer is no, but there are red flags. And I'm going to show you a whole lot of housing stats, all thanks to blank night to explain why. Now, for the 53.5 million first lien home mortgages in America today, the average borrower credit score is a record high, 751. It was below 700 back in 2010. And thanks to the run-up in home prices recently, those borrowers have record-tappable home equity, which is how much you can take out of your home and still leave 20% in. That's a collective $11 trillion, up 34% from a year ago.

Really record low mortgage leverage today, so that's a significant cushion in case. home prices soften or, God forbid, even fall, but very little negative equity today as opposed to the Great Recession when one in four homes was underwater. So what about the riskier loans? There are just two and a half million adjustable rate mortgages outstanding today. Compare that to 13 million in 2007 just before the subprime crash. Today, 1.4 million of those are facing higher resets, and yes, those are at risk. But back then, about 10 million of those were facing resets. Mortgage delinquencies are now at a record low, just under 3% of those currently passed due. That's fewer than before the pandemic. So the real risk to housing right now,

recession. If people start to lose their jobs and can't make their mortgage payments, then we've got real trouble. Back to you guys. How much, Diana, is it likely that the flexible rate mortgage, the variable rate mortgages will come back? And they won't be just two million of them in three years. It'll be back to 10 million. million of them. You know, we have seen an uptick and adjustable rate mortgage demand over the last couple of weeks, and that's because they carry lower interest rates. So as people are stretching to afford this housing market, they're looking to those loans.

But remember, these can be fixed, five, seven, ten years, and they are fully underwritten now, not like they were back during the Great Recession or before then. So yes, we could see more of those loans, but the share is still really low, just 8% of mortgages today compared to over 30% back before the crash. So, you know, more risk coming for sure, but not nearly as bad as it ever was. I think I've had every type of mortgage there possibly is, including my first one, Diana, at 12% back in nine. Mine was nine.

You were nine. Okay. Well, I'm a little older, so I was 12 and you were nine. All right, Diana, have a great weekend. Up next, a biotech and outperformer today, we will highlight the biggest move of next and take a look at shares of Match Group. The stock now trading at all time lows. Nobody wants to date. Nobody. Nobody wants to go out. It went public in 2015. It's now down 47% this year. We'll be right. Sad. Crypto crashed. Crypto. Yeah. Welcome back to Power Lunch, everybody.

Check out shares of C-Gen. The Wall Street Journal reporting Merck is considering a bid for the company. They do cancer work. The report saying no deal is imminent. But that other suitors may exist as well. And it's spurring a pretty nice day for biotech with the name like Biogen up 6%. Biogen is one of only six, or I'm sorry, 15 stocks in the S&P 500 that's higher for the week. The spider biotech ETF over there is up about 6%. So if you have pretty much have anything with therapeutics in your name today, your stock is up, Ty. All right. After the break, we're going to take a look at some of the names that lost their pandemic gains. And while it was a very volatile few trading days with some steep down days. These, there are some stocks that are soaring as we end the

week. They're ending the week in the green. Oracle up nearly 2%. Beyond meat, 5%. Neo up 15% and Boeing up 9. We're back in Deuce. Duet. A number of notable stocks in the S&P 500 are trading at or near multi-year lows. DISH trading near levels not seen since 2009. Pay bow. Pay bow. Pay, PayPal at lows back to 2018. Intel at levels not seen since 2017. Are they worth buying or should you steer clear? Let's look at the trio of stocks with Matt Maley of Miller-Tayback, chief market strategies. First up is DISH. And if I'm understanding you right, you see some technical temptations here. But fundamentally as a long-term play, you don't like it. Yeah, Tyler. And by the way, happy Father's Day this weekend.

But the, yeah, DISH is on a technical basis, the stock is getting old. oversold and it looks like it might be hitting a double bottom here. But I think the fundamental, I mean, so it could be a very short-term balance, but the fundamental backdrop is just too dicey for me. I mean, right now we have a situation where, you know, their revenue has been down. The big thing is their subscriber growth is down. And there's a fierce competition for subscribers right now. And pay TV, of course, is a very mature industry.

But the one thing, too, is that the government, one of the things that has done real well in the last several years has been broadening the broadband around the country. Therefore, people aren't going for dishes much. They can use their computers to get to, you know, get the whatever what they want, Netflix or whatever else. And that's just going to make it tough for them. I mean, the stock is not expensive, but I just think when you're in a mature industry and the competition is as tough as it is right now, it's just a tough one to buy for a long-term basis. So that's how you get a stock below pre-pandemic levels and you're still bearish. The other name that you don't like of this group, Matt, is our next one, PayPal. Why is that?

Well, PayPal, I mean, here's another stock that's fallen a lot. I mean, it's down 75%. And the concern is we're going, you know, seems to be heading into a recession. We'll turn that down, no more. Sorry. Turning into recession. And that's something I've been looking for for several months now. But, you know, it's a stagplation or inflationary recession. And, of course, that gives people less money to buy things. I mean, one of those, you know, their revenues is down, but also their new accounts have been falling. They were already falling before this inflation problem became a bigger issue. Now it's becoming a bigger problem, and it's just hard for them to be able to grow that new

account growth to the degree they want to. I'd also note taking a page from the Nigerian brothers that we've seen some good-sized put-bying in this name. But I don't want to be shorting this name. It's down 75%, but I just think you'll be able to get it at lower prices. I think that phone call was from the CEO of DISH Network, by the way. Let's move on to a bullish name here. Finally, Intel.

Yeah, this is one I think has got to be in everybody's portfolio. We have companies, remember back during the crisis, the financial crisis, there were companies that were too big to fail. This one's a little different. It's too important not to succeed. And the reason I say that is that it's a national security issue. I mean, we depend so much on Taiwan for our chips. Intel is finally getting back into the chip business with a lot of help from the government,

with this new fab in Ohio. And we have to have, they have to be successful. The government will make sure they get the contracts to be successful. And plus they've got a great new management team, and the stock is inexpensive. It's oversold. This is one you want to buy. I haven't done it yet, but I'm going to do it before the month's over. I'm going to be buying this every single month, a little bit, every single month for the next six to

12 months because they're too important not to succeed. And when the next bull market comes along, I have a real next position to really let it run. We'll leave it there. Matt Maley, bullish on Intel, bullish on America. Thank you very much. And happy Father's Day. And to Eric as well.

Thank you. How are you celebrating? My wife has a secret trip planned. Plain trip? No, I think it's a driving trip, but I'll tell you all on Tuesday. Thanks for watching, Power Lunch, everybody.