Power Lunch - Power Lunch 6/24/22

Episode Date: June 24, 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 everybody to Power Lunch. I'm Tyler Matheson. This is, of course, a very busy day on several fronts. Look at the markets, all the averages up at least 2% today, and 5% on this shortened week. One of the rare weeks where we've had green numbers as we slide into the Friday close. And, of course, the Supreme Court overturning Roe versus Wade. We're tracking the political and the corporate reaction, and we will keep you up to date on all of it as it breaks in this hour. Kelly. Tyler, thanks. Hi, everybody. And as Tyler said, a big rally for the markets today. And look at these week-to-date changes. This despite the University of Michigan consumer sentiment showing a decline in sentiment and in inflation expectations. So the latter is really helping boost sentiment. The Dow's up almost 5% this week. The S&P up almost 6% the NASDAQ up 6.5% this week. So leading the Dowd today, Salesforce Goldman Boeing. Boeing up 17% in the past month. We have more on that stock coming up. This is a the price action today, 5% gains for these three. Atop the S&P, it's travel everything. The cruise lines are finally soaring again after strong numbers from Carnival. That stocks up 10%, Royal Caribbean

up 14% Norwegian in the middle there. The casino is also rocketing higher. Penn National, Caesars, Win, MGM Resorts, 10% gains here. Tyler? All right, thank you very much, Kelly. Let's get back to the historic news out of the Supreme Court earlier today. Striking down Roe v. Wade after nearly 50 years, even though we had an idea this would happen, the official decision, sending shock waves throughout the country. Let's go to Amon Jaffers for the latest out of Washington. Hi, Damon. Amen.

Yeah, hi there, Tyler. When the Supreme Court issued its decision this morning, it said it was turning the issue of abortion back over to the states and to the people's elected representatives. And it took only a short time for the people's elected representatives to start fighting politically about what's going to happen next, including the possibility of a new federal law passed in Washington that would restore abortion protections on a country. nationwide level. No indication whether that will happen or not, but President Biden talked about the prospects for it in his remarks to the country. Take a listen. The only way we can secure

a woman's right to choose and the balance that existed is for Congress to restore the protections of Roe v. Wade as federal law. No executive action from the president can do that. And if Congress, as it appears, lacks to vote. votes to do that now, voters need to make their voices heard. This fall, you must elect more senators and representatives who will codify woman's right to choose into federal law once again. Now, Republican leader Kevin McCarthy for his part on Capitol Hill, coming out just a few minutes after the president.

The Republican leader suggesting that what the president was pushing for there is a Democratic extremist policy. Here's what McCarthy had to say. Every House Democrat has voted for extreme policies, like taxpayer-funded abortion on demand until the point of birth. But Democrat's radical agenda does not have America's support. To the contrary, America rejects it because they remain committed to our values and our principles. Tyler, this is the first time that we've seen the Supreme Court withdraw a right that it had granted

50 years ago, a widely respected right. Now we'll see what the political ramifications of that decision will be. This is politically uncharted territory, so it's not necessarily safe for political analysts to say one thing or the other about what's going to happen. But what is clear is that there's going to be an enormous political fight over this between now and the midterm elections in November. Let's say, I think it would be a remote chance,

that the Congress passes such a law as the one. President Biden was calling for there. What would stop then there from being action against that law and what would stop a federal court from declaring that law unconstitutional or the Supreme Court? I think nothing would stop it at this point. You would what you would see immediately after Congress passed such a law if they could and not at all clear that they can. But if they had the votes and could do it, I think you would immediately see lawsuits against it given what we saw out of the Supreme Court. And I think those would go right up to the Supreme Court. you'd have this same six three conservative majority court dealing with the federal

implication federal law implications and I think the positions here are pretty well staked out on this issue we saw Clarence Thomas issuing in his opinion today saying he'd like to go much further he'd like to have the Supreme Court this new conservative majority revisit decisions on gay marriage revisit decisions on contraception a lot of things that have been settled issues in American society for decades now Clarence Thomas would like to go back and revisit with this new majority on the court. Not clear that that's going to happen either, but you get a sense that this court is going pretty far to the right and pretty quickly.

All right. Amon Javers, thank you very much. You bet. Meanwhile, corporations now have to figure out how to navigate the issue. We're hearing from many of them already today. Bertha Coombs has the latest corporate response for us. Bertha? Corporations and the health care industry, Kelly.

You know, 50 years ago before Roe, it wasn't as if abortion was covered by insurance and by employers. Now it has been over the last 50 years. And as we look at where it is going to be illegal now, it's going to create a very divided patchwork of benefits for insurers that provide them. They will not be able to provide coverage for individuals or small businesses who are often fully insured in those states where it is illegal. For larger employers, they're only going to be able to cover it in areas where it is legal. A number of employers have already said they will.

provide travel benefits to be able to go to those areas that it's legal. Obviously, this implicates doctors, this implicates hospitals as far as medical procedures. It also implicates the pharmacies as well. More than half of abortions now are performed medically. So the pharmacies dispense the so-called morning after pills. They're going to have to look at the patchwork nationally of where they can do that and how they can help their employees and their customers to have access in places where it is legal. I spoke with Ross Brewer, the CEO of Walgreens yesterday, saying she said it was going to be very, very complicated. I spoke to her here at the Aspen Institute. She talked about how she's likely to respond with today's ruling.

I do think it's going to be complicated. I do think we're going to have to address it as a company in our benefits packages will need to adjust. just we are, you know, everyone I think in this space is looking at, you know, do we provide travel benefits if that's, you know, a requirement. And again, it's back listening to your customer and your employees. And I'm committed to listening to my employees and abiding by state legislation. And so I'll find something in the middle there. A lot of companies trying to find the middle ground.

We haven't gotten an official statement this morning from Walgreens, what we had heard from CVS, which says it is going to support its employees and provide travel. access. Of course, we heard from JPMorgan this morning as well. City Group had already staked out a position on this, amalgamated banks, Salesforce, a number of larger employees as well. The insurers at this point, we've heard from Anthem and from United Health. They are studying the situation. And as Cigna's CEO, David Cordani, told me a few weeks ago, this is going to be a state-by-state employer by employer policy that they're going to have to develop. Back to you guys.

All right, Bertha, thank you very much. And as Bertha just mentioned, corporate America definitely, definitely caught in the middle on this issue. It is as thorny a social issue as a corporation's leadership will probably ever have to approach. We've got employees on the one hand, consumers to take into account, shareholders and other stakeholders, board members, more. on the decision now with Kate Kelly from the New York Times and Joanne Lipman, lecturer at Yale

University, both are CNBC contributors. Kate, as I just said, I cannot think of another issue that could be harder to handle for corporate communications people, for corporate policymakers, because there are so many sensitive spots in this. What are you hearing from the sources you're talking to? Yeah, Tyler, you're absolutely right. I think companies are trying very hard to. to thread the needle here. I think what we saw over the last five or so years is that corporations and CEOs were becoming increasingly vocal about issues they cared about.

I remember seeing this as an emergent trend after the Charlottesville violence and corporate CEOs stepped off of advisory panels to the White House in an objection to how President Trump handled the aftermath of that. And you've seen corporate leaders speak up increasingly about issues of immigration, the environment, and so on. But it's not without a backlash. First of all, as you know, companies have diverse

workforces in many cases. They may have employees with a whole range of political perspectives across all 50 states or a variety of states, and they don't want to alienate their employees. But of course, they also have stakeholders, including clients, including local, state, and federal politicians who govern them and may even use their services as well as their shareholders. So there are a lot of people to think about here. I think what we've seen in the last couple of years is a backlash, notably among conservative groups against some of the stances that companies have taken. There's a conservative group called Consumers Research that has attacked BlackRock for their

approach to ESG investing and criticize them for being woke. More recently, they criticized American Express for being racist against white people. So abortion is the most controversial of issues. I think companies on the one hand want to let their employees know that they care about their concerns and their well-being. And that's where you see some of these sort of quiet policy changes around travel services to obtain abortion if needed. But at the same time, they're very fearful of alienating people. And I don't think we've seen a lot of huge, bold statements in today's aftermath as companies sort of try to take the temperature. You know, I was speaking, Joanne, earlier today,

to an executive whom both of you know, who is now in the corporate strategy world, and he said sort of the basic message coming out of most companies is we want to take care of our employees, that their health and access to equitably dispense medical care is their principal concern. But Kate, Joanne, just made a very interesting point. There are lots of people who feel that companies that come out,

on one side of an issue are, quote, woke. What is the possibility that there will be a backlash against companies that in those states where abortion is deemed illegal, a serious backlash against companies that are in trying to serve their employees' medical needs, really violating the law of the state, for example, Texas, is there the possibility that those companies could be the targets of demonstrations, of violence, or things like that? How much is that a worry for corporate leaders? There's so much in this decision, Tyler, that is a worry for corporate leaders. I mean,

the business implications are massive, and certainly that's one of them. I mean, we've already seen a backlash, certainly in Florida and in Texas, Florida with Disney, with DeSantis, revoking its land use rights. So I assume we will see some more of that. But, you know, one of the really interesting issues that you and Kate have hit on here is employees have been extremely vocal in these last couple of years, and they do expect their leaders to take a stand on social issues and on issues, controversial issues like that of abortion.

But keep in mind, it's also been a really tight labor market. employees have had the upper hand in terms of pushing these their social questions. And so if we are indeed heading into every session or at least if we're heading into a slowdown, employees, if we're no longer in a tight labor market and employees no longer have the upper hand, that could also play into how this all turns out and plays out over the next few months and years. Kate, final thought from you on how these companies, are trying to thread the needle and whether ultimately they're going to be able to do it in a way, because so many companies have employee bases in many different states, in the states that are more liberal on abortion like New Jersey,

and those that are going to be more restrictive, such as presumably Florida, Tennessee, Texas, Louisiana, etc. Well, Tyler, first and foremost, these companies are going to want to follow the law. So if they haven't already, they have their internal lawyers pouring over the current legal status of their states where they employ people to see what is possible. I think to the extent possible, companies are going to provide travel services and coverage for people to obtain abortion services because there could be cases where the argument is there's a medical need for abortion. And they want to make sure they're present for their employees in those cases. I think beyond that, there's a little bit of a wait-and-see approach. Bertha did a great job of walking us through what's been said already. In a way, clearly, this is not a surprise to people because of the leak of the draft opinion.

Even though, even with that, I think the actual news has had kind of a striking impact on people today. So companies have been preparing for this. One former CEO I talked to today said he participated a few weeks ago in a 200 CEO session where this was discussed, and people were on high alert and high concern about it. But I think there's a reluctance to be first in making what could be perceived as a political statement about this. Having said all that, I do think we'll start to see a trickle of statements around these issues. Yeah, it will be very interesting to watch and see which companies do what. Of course, there are companies.

I'm thinking of a company like Chick-fil-A or Hobby Lobby that have much more sort of faith-based businesses, let's call. call it. They may be on one side of this and other companies will certainly be on the other. It's always good to see you both. Joanne and Kate, great to see you. Thank you. Thank you. Markets are closing out the week with the big game in the meantime. The Dow's of nearly 900 points, trying for its first positive week in four. Up next one market watcher tells us what the battle of potato chips versus semi-chips is telling us about sentiment. We're not kidding. We're back in two with that and much more on this huge market day. Don't go anywhere. Welcome back to Power Lunch, everybody. We have those sharp rally in stocks into the weekend as

the Dow and S&P are up for the week for only the second time in the last 13. The NASDAQ is the best performer. It's up almost 6% this week. Our next guest still expects consumer staples to outperform. He says when the conversation on Wall Street is about potato chips instead of computer ones. So we know investors are truly scared. Pepsi, by the way, only down 5% this year, while NVIDIA down 42%. So let's bring in Rich Bernstein. He is the CEO and CIO with Richard Bernstein advisors. Rich, perfect encapsulation of the environment we've been in for the past six months, but is it possible we're about to see a major regime shift? So, Kelly, I think, you know, there's only two certainties that we have going into the second half of the year. You know,

there's all this stuff going on, but there's really only two certainties. Number one, profits growth is going to decelerate. We know that. We know that. We know. The comparisons are very easy. Now they're very hard. Profits growth is going to slow. And number two, the Fed's going to tighten. Now, if I ask you to take combinations of profits growth and Fed tightening or easing, I'm sure you would not choose the Fed tightening and profits growth decelerating.

And that's the worst combination of the four that you could possibly come up with. So what we're doing is we're straddling kind of late cycle and defensive. And I think what's very interesting is that the discussion in the markets has been pretty consistently, do you want growth or cyclicals? Only recently are you getting discussion about defensives and true defensives, which is interesting, given that everybody's fearful of a recession,

when defensives work the best in a recession. Can you go from late cycle to early cycle without having to end the cycle in between? I sort of doubt that. I mean, I suppose it's possible. Anything's possible. But history says you really go from late cycle to defensive and then from defensive

to cyclical. And that was my point about potato chips versus computer chips. Then when everybody is embracing potato chips and nobody's talking about computer chips, that's probably your signal that we're at the bottom in technology. So when you say we've toned down the cyclicality in our portfolios, put some sharp names on that. In other words, that means sell this, buy that and I don't mean you have to name specific companies, but sectors.

Sure. So, Tyler, we were very, we were very, overweight the energy sector. You know, it's really been my favorite sector for the past several years, a couple of years since, you know, after the pandemic, the 2020 story into 2021 into early 2022 was all really about energy. And we were dramatically overweight energy in our portfolios. We're now slightly overweight energy. And we're now more overweight consumer staples than we are energy. That's a huge shift in our portfolios. Whether you look at energy, you look at materials, you look at industrials.

We're still overweight that group is kind of the late cycle play, but consumer staples is now our biggest overweight. But so I want to go back to what you said a moment ago, Rich, when you said that we go from from sort of defensives

then to cyclicals. Can you talk a little bit about that? And like you said, if now you're seeing maybe some signs of a breakout in technology, what would that tell you? Well, I think right now

the breakout in technology is a little bit of a, a head fake. I think that people think that somehow we're magically going to return to 2018, that inflation subsides, the Fed stops tightening. It's all beautiful. And we go back and talk about tech, innovation disruption and cryptocurrencies. We just don't think that's a very realistic scenario that you're really not going to squash inflation without some kind of meaningful slowdown in the economy. We could talk about whether it's a recession or not, but you need a real meaningful slowdown in the economy to squash inflation here. And, and, and, you know, and,

And so we don't think we're just going to return to 2018, like it was all just a nightmare, a bad dream, or wake up tomorrow. We don't think that's going to happen. So how long do you think defensives can outperform, given that they've already outperformed for the first half of the year? Yeah. So, you know, that's kind of a function of how aggressive one thinks the Fed's going to be. My personal opinion is the Fed hasn't even started getting aggressive yet, given that the real Fed

funds rate remains historically negative. and every recession in the last 50 years has been preceded by a positive real Fed funds rates. We have a historically negative real Fed funds rate when usually it's a positive one that precedes recession. So I'm not even sure, my personal opinion, I'm not even sure that the Fed has even started to get aggressive yet. They're talking to talk, but our story has been that they're hunting elephants with pea shooters. And in that case, this could still all have some legs or some room to run. Right, exactly, like an elephant getting hit with a pee. Right. Wouldn't want to be near that one. Richard, thank you very much. It's good to see you today. We appreciate it. Thanks, guys. See you later.

Rich Bernstein. Coming up, if you want to look at a stock that Wall Street can't make up its mind about, look no further than Netflix. Just this month, it's had as many up days as down ones. So where does it go from here? We've got an old school bull versus bear debate ahead. Before the break, though, let's get a quick check on some of the names bringing the NASDAQ higher. Here's technology outperforming with Data Dog up 23. percent, Octa and Z scalar, up nearly 20 percent. Mercado Libre and Lucid up more than 15 percent. We're back in a moment. All right, welcome back to Power Lunch, everybody. Big news day today and a big market day. Let's go to Dominic Chu at the New York Stock Exchange for a look at today's rally. And as Kelly pointed out, we're going to have a green week, it appears. And a strong one, right?

I mean, a pretty decent-sized rally we're seeing. It's broad-based, Tyler, to your point as well, markets have been pretty much hovering at our these levels, the session highs, pretty much since noon at this point, the Dow, the S&P, the NASDAG, each gaining north of 2% on the day. But it's even the small and mid-cap stocks that are doing even better than that, up two and a half to sometimes 3%. Now, from a sector perspective, it's the economically sensitive ones, talk of financials, materials, industrials that are leading the way higher. And as you might suspect, the other end of the spectrum is the laggards, right? The defensive sectors like health care, consumer staples, utilities, those sorts of stocks.

Now, some of the stocks themselves posting big moves to the upside include the transportation names, thanks in large part to FedEx because the shipping and logistics giant reported mixed quarterly results, but it did say it expects a key measure of profits to rise in its current fiscal year. Oil and gas stocks, also posting solid gains, trying to really reverse some of the steeper losses we've seen in just the last few weeks. Exploration and production, upstream names like EOG resources, Occidental Petroleum, Hess, Diamondback Energy amongst. some of the best performers in the S&P 500 energy sector. On the downside, though, check out what's happening with lending tree, not in the S&P, but the online lender lowered its second quarter guidance, saying rising interest rates and inflationary pressures have hit its business. So some upside names, but still some downtime names, Kelly, in this market, Tyler, back over to you.

All right, Dom, thank you very much. Let's turn to Rick Santelli in Chicago now where bond yields are turning higher again after being down sharply so far this week, Rick. Yes, down. sharply so far this week really does summarize it. And University of Michigan's sentiment at 50 was a 44-year low going all the way back to 1978 record-keeping. But we did come off on the one in five-to-tenure inflation rates just a bit. And that definitely seemed to make a difference briefly as you look at the intraday of 10-year note yields.

Right as that number was being released, we were at the 309 yield. You could see yields are now close to 312, so we're higher. But that does give you an idea. It put a lot of volatility. anything when inflation moves the market. Let's look at a two week of tens. Boy, we had an intraday high at 350. We had a high close at 347, and here we sit at 312.

Quite a difference. Fed Fund futures? Well, if you look at a two-week chart, we're 22 basis points above the low close, and that's almost a quarter point taken off the table. But from the intraday contract lows, we are 31 basis points high. Remember, higher means less Fed built into that contract. And that contract always seems to get what it wants with regard to the Fed. Finally, the dollar index, we all know with interest rates kind of coming down a bit,

Fed Fund futures higher, the dollar index has come down a bit. It's down for the day, down for the week. But as you look at a one-month chart, we're not that far, a penny and a quarter away from the high close you see there, because it goes all the way back, 20 years to Dece 2002. Tyler. Rick, I promised last week I was going to ask you a Friday question every week. It's got to be quick. What did we learn this week?

We learned this week that there's a tale of two Fed chiefs. The one Fed chief during COVID times was a cheerleader for more fiscal stimulus, as evidenced by many headlines like in the Financial Times. But this week, it was all about sticking to his knitting, didn't want to talk about past, present, or future when it came to fiscal policy. I'm not sure I agree with that approach. That kind of made me want to do a little riff on that, Tyler, and thank you for asking. Did I tee the ball up for you or not?

Rick Santelli, thanks. You certainly did. A head on power lunch. A bullbear binge. We debate Netflix as the streaming giant faces an uncertain future, laying off more employees, raising prices, shifting towards ad-supported content, dealing with strong competition. The stock is up 5% today.

We'll be back in two minutes. All right, welcome back. Wall Street growing more and more divided over Netflix and the future. of that streaming giant. The stock down nearly 70% this year, and investors are starting to ask the question Netflix asks every time you fall asleep on the couch after binging Stranger Things. Are you still watching? Some of the top issues on our watch list, subscriber losses, streaming competition, rising costs leading to layoffs, price hikes, adding an ad business, and takeover potential. Takeover? They were supposed to be the buyers of every,

everything, not maybe a seller. We've got a classic bull bear debate. Wed Bush's Michael Pactor is our bull, bull, with an outperform of $280 on the price target and benchmarks Matthew Harrigan is our bear. He says sell, $157 price target. Michael Pactor, the longest guy running bear on Netflix, has changed his stripes. Why? mostly because I have integrity and I actually think the stock's worth 280. So when it was trading at 600, it was a sell. And when it's trading at 190, it's a buy. And did you think that your, not I'm not going to call them colleagues,

but your fellow analysts who kept saying that the stock was going to keep running, running, running, running, obviously it did for a long, long time and then it stopped. are you saying that they are equally wrong now in thinking like Matthew does that it's going to go down, down, down, down, down. In other words, the wisdom of crowds or the madness of crowds. You know, I don't want to disparage Matthew, and I don't know what his thesis is, so we'll let him speak for himself. But I think on the way up, it's a tendency to the cell side to tell you what just happened and extrapolate and tell you why that's going to continue to happen. And on the way down, same thing. So, you know, I think these guys had a hiccup.

I mean, clearly competition caught up with them. Clearly subscriber growth slowed. They're kind of a victim of an outdated model where they dump all the episodes at once. They're beginning to emulate the competition there. They're picking up ad support. So they're emulated a competition there. They're starting to cut costs. They're starting to focus on, you know, not making as many movies.

So I think if they focus on the bottom line, they're going to deliver profit growth. and profit growth, maybe it's not worth 600, but it's worth 280. All right. Matthew Harrigan, your turn. Hickup or Heimlich? I think it's probably more of a Heimlich. I think people have really approached this as a tech name, you know, more or less a winner takes all outcome or somewhat in that direction, at least. I really think it's a media name. You know, we've been pretty agile in our ratings. You know, I've had buys on this before. You know, unfortunately, I upgraded it from cell to neutral after Q4 came out. and then somewhat unfortunate, we upgraded or downgraded again to sell from neutral fairly,

you know, recently. But I think if you kind of apply, you know, validation parameters for media stocks, you know, we're still assuming they get to, you know, 350 million early in the next decade, you know, mid-20 percent type margin. I think that's what the stock would be priced for if you ran a valuation all the way out to, you know, 233, let's say. And at this market, you want sort of short-term success. you've got probably another big loss of subscribers, you know, two million guidance in this quarter.

You know, I don't think the second half is going to be as robust as people would like. You know, if you truncate the forecast, you know, more toward 2728, that's where we get to our 157. And I don't think it's going to be easy to instill advertising business and cut down on the password sharing, et cetera. So Matthew Harrigan, I guess my question is, while your price target, it's differ by $100 or so right now. The real question is whether Netflix is ever going to be a $600 stock again. I mean, are its growth days over? Is there anything they can do to redeem the story?

Matthew, what are your thoughts? Well, the street really crystallizes around this being X growth over the next couple quarters and be very difficult to lift the margins, given the competition, despite the newfound cost consciousness. I mean, I think our price target is probably generous. you know, the Uber Bull instance is certainly an 800 million home TAM, you know, looking mobile devices as well, you know, margins going to 40%. And I think that's, you know, highly implausible at this point. And frankly, I think the company has a very mixed record on content execution

for spending high teens billions. And I know that the Bulls like to talk about the B, being fairly moderate next year, but you have to look at the free cash flow here. And you're probably going to be, you know, three or four percent type precast will yield next year. And the programming cast span is still well in advance of the amortization. So I would be very careful here. All right, Michael, you get the last word here. Matthew is certainly correct. The company has spent a tremendous amount on content.

But when they have a hit, they've really got hits. And true. And, you know, I think they finally had figured out the formula. They're going to make 25 Korean language shows because they've proven out that Squid Game plays. cross-border and works in the West. So we'll see. Those are low-cost investments.

I think that what they really need to do is kind of slow down on quantity, focus a little more on quality, adopt more of an HBO model, which is 30, 35 shows a year as opposed to 1,000 the Netflix has. And I think you're going to start to see that. You're seeing the layoffs,

you're seeing that they're cutting movie deals. So I think that they're getting cost-conscious. I'm not predicting that they're going to make $100 a share, be a $600 stock. You know, I'm predicting they're going to make $15 a share in the next three or four years with really modest growth and keeping their subscribers through all those different features, ad support, and cracking down on password sharing, just to keep people from churning quite as frequently and then staggering releases.

If they do all that and they make, you know, 15 bucks a share, it's pretty easy to see how they're going to trade up to 18 times earnings. That's essentially the market multiple. It's maybe a 5% premium to the market market. multiple. So it's not going to command a growth multiple. As you say, there's kind of more of a slow growth narrative. Michael Pactur, it's nice to see you again. Matthew Harrigan, terrific. Fantastic. Appreciate it. And coming up, agricultural commodities are a little higher today, but still showing massive declines in the past month or so. We'll dive into that with the agrelated stocks, also showing tons of red. Is this a sign of peak inflation and what comes next?

We'll break down the impact on the industry. Stay with us. Welcome back to Power Linge, everybody. Ag stocks are getting hit this week. CF Industries down 2%, Mosaic, 6%, Agco 5% and deer down about 3%. The drop coming as grain prices fall significantly. Just this month, wheat's down 13%,

corn's down 10%, even soybeans are down 4%. In fact, wheat is on pace for its worst month than three years. So is this the sign of peak inflation we've all been waiting for? Let's bring in the president of Blue Line Futures, Bill Baruch. Bill, it's good to see you. And what is this price action telling us? Yeah, I mean, I think we are getting a little bit of peak inflation story here. What the Fed's doing has worked.

But this is also a story here in each sector, whether it's agricultures or energies, they have their own narrative. And for ags right here, there was cold, wet weather that was tough to plant and say Iowa, Indiana, Illinois. These are big producing states. And we've had very good hot weather supporting the planting. And that was a very bearish for price action here. You also have some positioning dynamics, not just nags, but again, across the board here,

options on July futures expired today. So I think that helped drive positioning down a little bit. And same way crude sold off last week, July crude oil expired, and those options expired last week. So we are at a juncture where we have oil prices dropping metals for. falling, the softs underperforming. Should investors take this all as a pause in a bull market or as the end of it? Listen, for now, I think it's a pause in a bull market. What the Fed has done, I mean, they've tightened financial conditions. You're seeing some disinflation take place

here right now. And that, you know, ultimately is going to allow them to, again, take their foot off the gas potentially. Potentially. I'm looking at the CPI numbers that come out and for June, July and August that come out in July, August, and September. That's really my name, my narrative is, you know, you're going to have an inflation showdown at Jackson Hole in August. And I do think that the CPI numbers are going to cool. What the Fed has done, you know, starting at the end of last year, mortgage rates reacted, financial conditions have been tight.

And obviously there was some supply chain bottlenecks in the war in Ukraine that lifted some premiums on a number of assets. But that's worked through the system. So I do think that these. the inflation is going to be lower when the data comes out, and it's going to resupport commodity prices. So I definitely look a little more positive in the future here. So let me make sure I'm understanding you correctly. I think you said a moment ago that, yes, maybe inflation is peaking, but no, when I look at wheat and corn and soybeans and things like that,

the sell-off that we've seen is not really because inflation is cooling. It's more because planting conditions have gotten better, and that the, you know, that the sell-off that. This is a pause in a bull market, and that that would suggest that prices are going to begin to rise again in these soft commodities and maybe even in some of the hard ones. I'm a little confused. Absolutely. So you do have what the Fed has worked to disinflate the economy, and I think that's been weighing on prices. You also have positioning-wise, I mean, investors, whether you're a portfolio manager or a retail investor, you're chasing the narrative. I mean, there's people that had no energy exposure buying energy stocks when crude oil.

is trading at $120, of course this thing's going to roll over at some point. And we're looking to this as opportunity because, you know, we've been longed this narrative for quite some time. You know, just last week, put this in perspective, XLE had the Week 3 options expiration and nearly 1 billion options that were in the money to start the week, expired worthless. I mean, so you're looking at greed, losing again. I think what you're seeing here is these prices coming in as people chase them at highs. And, you know, the same way, let's shift the gears here, talk about the equity market.

The equity market, you have people panicking out on the lowest. I mean, obviously, you should have been managing your position for much of this year, not just managing it over the last week to two after May CPI number was hot and you had additional selling. So what we saw last week in the equity market was record volume on Russell 2000 futures for the week of last week. And then for the S&P and the NASDAQ futures, you had the highest volume since going back to March 2020. And then you also saw some Bank of America numbers today that did say. say that about I think it was 17 billion of outflows for the first week of outflows and equities and going back seven weeks. So people are panicking down there. I mean, you're seeing selling

really kind of across the board as people chase those commodities up. They're liquidating now. And I think that's going to be a buying opportunity around the corner. All right, Bill, thank you for explaining it to me. Thank you very much. Bill Baruch. We appreciate it. And coming up, three big movers today. We've got Boeing. We got Wells Fargo. We got Bush, Bausch Health, not Bush, not the beer, Bausch Health. Our trader will tell you whether to buy or sell. All right, we're trading three big movers in today's three-stock lunch. Boeing up nearly 5% after CEO Dave Calhoun told investors that the drip, drip, drip of bad

news should stop soon. Wells Fargo up 7% after a positive stress test from the Fed paves the way for banks to boost dividends and Bausch Health companies jumping 17% on the heels of a C-suite shakeup. Lee Munson, is portfolio wealth advisors, president, and CEO. Let's go through the stocks. Lee, beginning with Boeing, which is just announced it's going to move to my hometown of Arlington, Virginia. You know, stranger things have happened. Let me tell you, Boeing does have this drip, drip, drip, I think it's going to stop.

Here's what they have to do, because they've already told us the supply chain is going to be a problem until the end of 2023, and it's baked into the price. But if they can get that certification, that little golden letter, that golden ticket that says the 777X is ready to sell, I think it's going to be a real game changer because it's going to be a high demand plane. But they've had problems with the 787, and luckily, the public doesn't remember the 737 max crashes in that debacle. So you've got a company that has one of the most complex supply chain issues that has ever occurred in any type of company here. And we might see in 18 months that lift. So I actually think that you've got 40, 50, 60 percent on upside on Boeing and maybe only about 20, 25 percent if they can't execute. Again, this is not about the moves. It's not about the drip-drip. It's about can they deliver these planes the way that they've said.

And can they get certified on the 777X? I think they can. I think you should consider it. All right. Let's turn to Wells Fargo then in the wake of these stress tests. What would you do with this, one, Lee? You know, I've hated Wells Fargo for years. As somebody in the banking industry, I felt very betrayed by the scandals and the fraud from six years ago. It was six years ago. The public doesn't remember. So now we've got the new sheriff in town, the new CEO that's been there for like three years right now, okay? And he's doing the right things.

First of all, the stress test, of course they're going to do well. If you have so many tickets, you've got to drive 10 miles under the speed limit. Of course you're not going to do a bunch of risky loans. You're going to have flying colors. But I love the banks. I'd want to buy banks right now. I think Wells Fargo can go back into a basket, you know, things like JP Morgan, Bank of America of these big money setter banks.

Why? Because these consent orders are starting to lift. These are the handcuffs they've had in regulation. And they've started to get lifted last year. They're going to continue to be lifted off. The regulators are easing back. And this new CEO, he's very clear. He wants to get out of the mortgage business because you can't compete with non-banks.

And they want to start doing wealth management, credit cards, compete with the big boys. I think they can finally pull it off. And so if you're looking at a basket, I would finally start considering Wells Fargo, not a value trap anymore. And a quick final thought on Bausch Health Company. What a dumpster fire. I mean, you know, it goes up

because some guy who did a magic trick, John Paulson from 14 years ago, what has he done since then? What famous call has been since? He's on the board. It has to do with this Sulta IPO. It's a skincare thing. They want to spin it off.

They couldn't do it. They already had the Bausch and Lome IPO go. as real, you know, bad timing didn't really work well. So I would be, if you hear along this, I would look at it as a perfect opportunity to get out. Let it base out, see what's going to happen. This is a great stock. If you're an armchair, want to be hedge fund manager, and you're looking for some sort of overly complex, kind of dodgy trade. But I just don't see, once they get rid of everything, I mean, their core business, this was valiant.

Yeah. People went to jail over this company. We got to leave it there. Tell us how you. How does Lee? Love it, man. Steak in the ground, man. Lee Munson.

Appreciate it. A deadline is looming in time for a potential port shutdown that could further weaken the supply chain. We have the details and what's at stake next. As if the supply chain didn't have enough problems, in one week the West Coast ports that handled nearly half the containers in this country could face a shutdown. Frank Holland is looking at the latest between the port. and the labor unions rank and which stocks could be impacted. Yeah, absolutely. You know, 45% of all container imports into the U.S.,

they come through the West Coast ports, including the port of L.A. and Long Beach, and one week from today on July 1st, the contract between the union workers and those ports, it expires. And while both sides say they're committed to reaching a deal, the last three negotiations have seen stoppages and disruptions before there was a resolution back in 2002, an 11-day stoppage in 2008, three weeks in 2014 slowdowns,

before the Obama administration intervened. Analysts say another disruption could actually benefit some of the transport stocks. Evercore says the East Coast rails, and that includes CSX and Norfolk Southern, they would benefit if the trafficked in ports shifts. And remember in May, ports in Virginia and Houston, they both reported double-digit increases. Bernstein says UPS and FedEx would benefit from increased demand for air and expedited shipping. FedEx, also the nation's largest less than truckload carrier. that allows multiple companies to put loads on the same truck.

Demand for LTL spike during the port log jams earlier this year. Cowan says freight forwarders. Those are companies that move goods through a variety of ways they could benefit. C.H. Robinson is the biggest freight forwarder from Asia to the U.S. Other names include expeditors and the Hub Group. Back over to you. Fascinating. All right.

Thank you very much, Frank Holland. It'll be a key event to watch. Well, the next hour, the most important hour of the trading day begins very shortly. and it looks like we're going to go out with a big green week. 6% or so for the NASDAQ, everybody. Thanks for watching PowerLine.