Power Lunch - “Sell” Meta, Europe’s looming energy crisis and Elon Musk walks away. 7/11/22

Episode Date: July 11, 2022

A top analyst is telling investors to sell Meta and says it’s no longer a growth stock. The analyst behind the Power Call joins Kelly & Tyler. Plus, the rising risk of a full blown energy crisis in Europe. And, Elon Musk walks away from Twitter. What’s next for the stock? 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, I'm Tyler Mathes, and here's what's ahead. A power call. A top analyst says sell, sell meta. The estimates are too high, competition is intensifying, and its big investment in the metaverse may take a long time to pay off. We have the analysts behind that call of the day. And the rising risk of a full-bone energy crisis in Europe, there are growing calls to turn down the lights as the power price surge and a heatway grip the continent.

We'll have the details later this hour. Kelly. Tyler, welcome back. Thank you very much. Hi, everybody. The Dow has turned positive today, erasing a 200-point drop, but we're only up two points right now. The S&P's still down 23 and the NASDAQ still down 1.5%. Now, wind resorts in Las Vegas sands are among the worst performers in the market today

as Macau begins a one-week shutdown to try to contain the spread of COVID, about 7% drops for these two names. And the Chinese tech stocks have a new regular. dilatory headache. Alibaba fined for failing to comply with anti-monopoly rules and not disclosing transactions. JD.com P&Duo duo bydo all lower anywhere from three to more than 10% tie. All right, a challenging week ahead for investors as earning season kicks off and key inflation data loom. Here to break it all down and share some stocks to watch is Stephanie Link, CNBC contributor chief investment strategist and portfolio manager at High Tower. Stephanie, good as always to see you.

Let's go through a couple of the macro economic, great, the macroeconomic data that you expect out this week. One is CPI, the other is PPI. Are you looking for any signs there that inflation may be topping off? Yeah, I mean, it's going to be a really busy week, right, between economic data and earnings. Yes, all eyes are on CPI, 8.8% is what is expected. Even if it comes down a little bit, it's still very, very high, and it won't change the Fed's outlook in terms of raising rates. PPI at 10.8% is expected. These are year-over-year numbers, but also looking at retail sales, as well as the University of Michigan sentiment numbers. Those come later in the week, and I think

those will be market moving as well. And then we turn to earnings, and earnings for the second quarter are supposed to be up about 5.8 percent, and total revenue about 10.5 percent. Energy will be about a 40 percent contributor to the total revenue number, and I expect those numbers to be very, very good, and revisions higher. And then financials will probably be the only sector that has year-over-year declines in revenue, and that's mainly tied to weak capital markets. How much will the revenue increase, if we see revenue increase,

apart from, well, in energy, you're going to see them no matter what. How much of the revenue increases traceable back to inflation? Oh, well, I think a lot of it is due to inflation. But I think the reason I highlight the energy component is because they're winning on a number of fronts, right? They benefit from inflation, and they're printing money anywhere north of $40 to $50 oil, and you know where oil is right now. So I expect good revisions there.

Let's look at a couple of the stocks that you have on your screen. One is Pepsi. Yeah. Yes. So we're expecting a good number tomorrow. Organic sales of about 7.7 percent. For the full year, 8 percent. I expect them to reiterate the 8 percent. And what we heard during conference season was that consumption has held up remarkably well, and costs have gotten no worse. So that's obviously positive for them. They have pricing power, we know, but is it leading to demand destruction? That's going to be the key on the call. The stock trades at one percent discount to Coke. It usually trades at about a one and a half percent premium to Coke. I think Coke is much more crowded. I like the Pepsi idea. And Stephanie, I think it's interesting overall to look at the banks and how

poorly they've done this year. When do they shake off this malaise? Oh, gosh. I mean, that's a million dollar question, Kelly. Is it Thursday with JPM? It's a tough one. Can they end? They started it this year. They were the ones who came out first thing and said expenses were way up and it seems like the stocks just never recovered. No, it hasn't recovered. And all of them are down. I mean, Wells Fargo is down 17%. That's been the winner, believe it or not, on a relative basis. I'm looking at Morgan Stanley and I'm looking at Wells Fargo because you know I own those two. And I still believe they're very attractive. They haven't acted well, but they're very cheap and they now offer really compelling dividends. Morgan Stanley is really more diversified from the Eat and Vance and E-Trade Acquisites. We know capital markets are going to be weak, as I mentioned, but they will do better, I think, in fees, in wealth management, and of course, net interest income. And then you shift over to Wells Fargo. That's a restructuring story. The number to watch at Wells is their cost figure at $51.5 billion for the full year. If that stays flat, I think the stock can rally. It trades at 0.96 times book. So both of these I like. I don't know if this quarter is going to help the stocks, but for the long term, I still own them, and I like them. And a final thought on United Health?

United Health. I mean, the only problem with United Health, Tyler, is that it's expensive, right? That's 24 times forward estimates. But that E, I have a lot of confidence in. I expect a good number, a beat, and they raise. It usually trades down on their earnings for whatever reason. I will be buying more. It's my largest health care position.

They're the dominant payer of scale in commercial, Medicare, Medicaid, and now in local with Optum. They should do double-digit earnings growth, and they're buying back about five to six. billion a year in stock. So I like that one, even though it is a little rich. A busy, busy week ahead. Stephanie, thank you for walking us through it. We appreciate it. Stephanie Link. Thanks. Now, let's get to today's power call. The note everyone on Wall Street is buzzing about meta-downgraded to underperform at Needham, one of just two cell ratings on the whole street. Competition, consumer behavior, and risks around those metaverse investments, a few reasons why they say it's overvalued. And with future growth projections so low, Needham also says it's not

a growth stock anymore. Let's bring in Laura Martin. She's Needham's senior internet and media analyst. Laura, it was the decade of Netflix. You won that round. Meta now this is a, now it's going to be all about meta and Facebook. And let me ask you this. I think a lot of investors in this stock right now would say, sure, fine, it's not a growth stock. It's a value stock. We'll take it. But are you saying that the problem is it's still behaving like a growth stock with all of these metaverse investments. And at some point, they need to decide what they are and what they're going to be. A little bit. I think near-term what we're saying is move to the sidelines because the CEO has told us that he's going to increase spending this year. At the same time, his algorithms are moving his users into reels, which is the TikTok knockoff, and away from his higher monetization newsfeed and story.

So he has told you he's going to orchestrate margin pressure. At the same time, we all know short term that Apple's degradation of his targeting ability is hurting the cost. for thousand that he's able to charge advertisers. So we know this is going to be really a difficult earning year for him. So we prefer to move the sidelines while we look at things like, can he actually get the 94 million kids under 35 that have moved to TikTok? Can he get them back? Because they're his primary content creators.

Right. Like that's an important question. And I wish I could recall which firm it was, but we just spoke a few weeks back with someone who's much more bullish on meta for precisely the reason that they actually think Facebook, and especially Instagram are going to steal the crown back from TikTok, and especially if TikTok comes under further U.S. regulatory pressure. Is that possible?

Maybe, but one of the problems we have now is, remember when they bought Instagram and they turned it and they replicated Snap with it and then they bought WhatsApp, or they bought Oculus? This company, as you know, regulators are thinking about undoing those acquisitions. This company will never be able to buy another competitor. So they'll have to always do this where the competitor is successful, then they're going to have to spend billions of dollars trying to catch off and replicate the competitor.

Someday they won't win. Someday they won't be able to replicate. So even if they can win the TikTok battle like they did the Snap battle, it's unclear to me that you can stop the next one because the fundamental issue here is they don't control content and they don't control their distribution. Their content is fickle. It can leave and go to TikTok or someone else.

And their distribution is through Apple and Andrew. who can make whatever privacy changes they want, and meta has no say in the matter. And what happens if their version of the metaverse turns out to be wrong, and their hardware turns out to be eclipsed by somebody else's hardware? There are other manufacturers out there. I could name at least one. Sure, and I think that's a great question, because what Mark is saying, what the CEO here is saying is that the material revenue from the metaverse, even if he's right,

comes in 2030. So the best question is, why own this stock in 2022 if the return on the investments he's making today are in 2030? Let's go somewhere else and come back in five years and see if his metaverse reality is actually going to turn out to be the right one and whether he's going to be the hardware that's winning. Laura, with the stock already down 50%, perhaps the better question is, why are there only two cells on the street? I think that's a good. great question, but you're going to have to talk to somebody else because I have to sell. When you move a company to sell, and we talk about it because it is so rare, what does that, what should we assume your time period is for something like this? I mean, how finite is this call?

So usually we're using a one-year time frame. So we're saying, hey, move to the sidelines while you assess sort of the strategic structural long-term value drivers here. especially the competition and some of the consumer behavior shifts, and see if they're going to be able to win, get back those users that they've lost to TikTok. So stay on the sidelines until you get some data points on that. If you don't buy meta, what do you buy instead? So we like other ad-driven names. You know, we're a longtime super fans of Roku.

We like trade desk here. We like, which is down from a 36 multiple to a 10, which best in class management and sort of what I would call a monopoly. de facto monopoly position in advertising. We like Magnite here. We like Apple here at these prices. And we really like $90 billion of free cash flow a year, which is what Apple has every year.

And they do on their own distribution. That's pretty nice. $90 billion of free cash flow. Laura, thank you very much. Laura Martin, we always enjoy your time with us. Appreciate it. All righty, coming up, the yield on the 10-year back below 3%. Pimco's Jerome Schneider will make sense of the signals the bond market is sending

as inflation fears collide with growth concerns. Plus, Elon Musk walks away from Twitter, taking a beating down 28% over the past three months. So what's next for Twitter? Is the stock investable now? And as we head to the break, Lulu Lamont and Under Armour, both lower on a Jeffreys downgrade. The company citing increased the competition for Lulu

and management volatility for Under Armour. We'll be right back. Welcome back to Power Lunch. I'm Dominic Chu. Shares of Nvidia right now sliding three and a half percent after Piper Sandler analysts cut their target price on the stock to $235 from a prior $250, citing, among other things, continuing issues in China and Russia, also gaming laptop weakness and concerns over recent weakness and cryptocurrencies that could lead to a slowdown in mining. Shares are well off the worst levels of the morning so far right now, but they're still down around that 3.5% mark. That stock is just positive. for the month, but have been cut in half so far this year. And by the way, also check out the semiconductor ETF, ticker SMH slipping today well off the session lows, but still watch those semiconductor chip stocks. Big moves there today, Ty, back over there. InVidia, one of the great darlings of 2021, not so much this year so far. Thank you, Dom. Treasury yields moving lower,

though the yield on the two-year does remain above the 10-year. This is the bond market looks ahead to some key inflation data later this week. Rick Centelli tracking the action, as he always does, along with the power player in the bond market. Rick, over to you. Yes, and thank you, Tyler. I'd like to welcome Jerome Schneider, managing director of Pimco and head of their short-term portfolio management. Jerome, we haven't talked in person since COVID hit. It's great that you're here in Chicago. And while you are, I notice VIX right now trading around 2610. And the reason I bring that up is, if you look at the low and high for the year, that's almost exactly at the midpoint. And I know that one of the themes we're going to discuss is the liquidity issue and the volatility

issues that are affecting equities and interest rates. And that really shows me that maybe investors are getting used to it, but they're not definitely looking forward to more of it. Right. And you can actually look at it and extrapolate it to fixed income, which is what we're most familiar with at PEMCO, and rationalize that even when you look at front-end rates, you've seen a tremendous amount of volatility and return round trips, even in the past month. The two-year note has gone from 3.1% to 2.8% back to about 3.1% today. So the volatility that we're seeing in the marketplace is really punctuated by a no-known in the marketplace, the single-known known, which is the Federal Reserve is ever more data-dependent

than they ever have been in recent memory. And that's creating a little bit of uncertainty, but more formidablely is changing liquidity conditions for all investors across all asset classes, equities, currency. fixed income, hard assets. So as we think about where rates are going, we really should rationalize it in terms of thinking about what are those macroeconomic sensitivities and then ultimately understanding that the Federal Reserve's

destination may not necessarily be as important here, especially if we need to keep an eye on where volatility has come from, is going to, and maybe we'll revert to. Instead, investors really should rationalize a little bit where we've come from. Front-end rates are no longer in the shape of a donut. What we actually see is that rates are moved higher, it's also increased the cost of capital. Those transactional costs, as I look at

yield curves, but were inverted, obviously, as Tyler pointed out, around 307 in a two year, and 10 years are trying to get over 3%. So we have juicier yields in the front. That's always a positive, and you've always accentuated that. Now, you talk about a data-dependent Fed. First of all, I know they are, but if they ever been not, if they ever ignored the data, no. I guess my issue here is is their track record isn't excellent. They definitely did not see inflation, even though they had big seeds to make it grow. Shouldn't investors be a little bit concerned that they seem out of phase past and present to some extent? And QT has barely been active for what, since June? So I think your point about, you know, the Fed has been actually

dealt a pretty difficult set of cards, a hand of cards at this point in time. And it's all about sequencing. The data dependency is something that they've really relied upon in terms of communication and in recent memory. Now that data dependency is slightly working against him in terms of how the market is digesting this information. Last week's economic data, specifically the jobs, is going to pivot to really what they're focusing on this week. The inflationary data. And you know what? That's where we want to be. So it's jobs, jobs, jobs. Pretty good report. 372,000, not bad, 3.6 on the unemployment rate. But now how do you take that, which nothing in that report smelled of a recession? Now we look to CPI on Wednesday. PPI is not as

important to the marketplace. You're looking for 1.2 on month over a month. Everybody else most likely is going to be looking at year over year. Give me what happens if inflation on CPI is higher or lower than expected. Give me your two views. This is the point is that it's going to emanate volatility no matter wise. There's a split decision in the marketplace right now. That split decision you're clearly seeing in interest rate risk, volatility and equities throughout the market system. What we have to also rationalize is that illiquidity premium has gone higher because we don't necessarily know where that destination is going to be. And you got to get paid.

for taking that additional risk. And that's exactly the point. Higher cash holdings are necessary. Higher liquidity, thinking about active liquidity management is necessary. And in doing so, you're going to be able to absorb a lot of the risk premium if you're going to have a higher cash standard.

So the structure is fundamentally changing. All right. Our time's just about out. I'll finish up with this. Interest rates moving higher in the short maturities is going to give equities a run for the money in terms of strategy. Jerome Snyder, thank you for joining me in Chicago.

Kelly, back to you. Rick Santelli, thank you very much with Jerome Schneider today. Up next, carbon cash crops. We'll take a look at one company that helps farmers profit from their carbon credits in today's clean start. Further ahead, Elon Musk would be going the controversial CEO walking away from his deal to buy Twitter. We will bring you the very latest and what could happen to Twitter next. Speaking of controversy, we'll also take a look at some names that Wall Street is betting against ahead of earnings season in today's three-stock lunch. We're back right after this.

Welcome back, everybody, to Power Lunch. Farmers obviously get cash for crops, but what about cash for carbon credits? It's how one startup aims to help fix the sustainability issues plaguing the farming industry, which is, on the one hand, one of the worst climate offenders, but also at very high risk from climate change. Diana Oleg joins us now with her continuing series Clean Start. Hi, Dai. Hey, Ty. Yeah, what if you could not only reduce the carbon emissions from agriculture,

but also produce healthier crops and increase farm profitability? Well, Boston-based startup, Indigo Ag, claims it can. What we really focus on is how do we bring new revenue streams to the farmer as they make this journey to sustainability? The answer is better farming, funded by carbon credits. Indigo Ag works with farmers on specific climate-friendly strategy, to draw down carbon dioxide into the soil and capture more emissions. Examples include planting cover crops and reducing tillage to improve soil health,

water quality, and biodiversity. This also makes crops more resilient to climate change. Indiana farmer Lance Unger was one of the company's first clients. He's now reducing his tillage and planting cover crops after the normal harvest. We'll go back in there and plant something to basically kind of help. help add organic matter and help the soil. In turn, Unger gets money from Indigo Ag's carbon credit program. These credits are sold to corporate buyers and 75% of the proceeds go to the farmers.

And they'll be issued by the Climate Action Reserve, the registry that drives the oversight and set the high quality standard that we're adhering to and the farmers are working towards. Indigo Ag started with a small pilot of 75 farmers but says it has now enrolled more than 2,000. If we can take and make our farm better, make our ground better, and help out the environment and still get paid for it at the same time, I mean, it's just something that's just the extra added benefit. That's the win-win for everybody here that we see, and we get to grow a nice business with it. Indigo Ag is backed by flagship pioneering Alaska Permanent Fund, Investment Corporation of Dubai, and Bailey Gifford. Total funding so far, $1.2 billion. $1. Indigo Ag introduced its first tranche of farm soil carbon credits just a few weeks ago,

with its program producing 20,000 tons in credits or emissions offsets. Fires so far include J.P. Morgan Chase, the North Face, and Barclays. Back to you guys. You know, it seems that farmers, Diana, would instinctively want to protect themselves from climate change. And carbon credits aside, why do they need a company like Indico to do that? Well, simply because they don't have the science and technology. Remember, farming is basically the oldest business there is. And a lot of these are older family farms that either don't have the technology, don't have the know-how to get these new kind of climate-friendly procedures in place, or they don't have the money to do it. And that's what

Indigo Ag aims to do. You had the person who was the farmer who was in the piece. How much would he in a year get in those carbon credits that are then sold to investors in the markets? How We don't have the numbers on that yet because it depends on, first of all, on the price of those carbon credits, which change market to market, time to time. So you would have to wait, see how the program goes first and hopefully get some numbers within the first year. Okay. I, thanks. Appreciate it. Let's get to Christina Parts and Evelace now for the CNBC News Update. Christina? Thank you, Talley. Good afternoon, everyone. Here's your CNBC News update at this hour. The administration inviting a group to the White House law on Monday for what it called a celebration of the new bipartisan gun control law. At the event, President Biden called for Congress to renew the ban on assault weapons, which expired in 2004. In that 10 years, it was law, mass shootings went down.

The law expired in 2004, and those weapons were allowed to be sold again, mass shootings tripled. The Department of Justice is investigating whether the PGA tour engaged in anti-competitive behavior as it sought to keep its players from jumping to the upstart live tour backed by Saudi Arabia. This is the second time the PGA has come under a federal probe. The tour faced FTC scrutiny back in 1994 rules that barred players from non-PGA events. The commission backed off the following year. The PGA sang to CNBC, this was not unexpected. We went through this in 1994 and we are confident in a similar outcome.

And Monty Norman, the British composer who wrote the theme song for the James Bond films, has died. Norman was 94. Kelly? Oh, we're set. to hear it. Christina, thank you very much. I wish we could play the music in his honor. Ahead on Power Lunch, a growing European energy crisis. Pricees and shortages continue across the continent. What are the long-term damages it could cause? We'll explore that. As we head to break, check out some of the cloud and software names down big today, including names like Fastly, leading the decliner's down 14%. Morgan Stanley downgrading it to underweight, citing a tougher spending environment, taking down the whole sector. We're back in a moment.

Welcome back, everybody. 90 minutes left in the trading day. We wanted to get you caught up across the markets on stocks, bonds, commodities, and a look at Europe's unfolding energy crisis. Let's start with Bob Bassani down at the New York Stock Exchange. Dow's turn green, Bob. Yes, a little bit better. We're down 80 points on the Dow right now, but we were agreeing briefly earlier, but it's still two to one declining to advancing stocks down here. Now, you were mentioning some of the software and cloud computing names. Another really weak group in the thematic tech area is everything associated with social media. I mean, look at Meta down again today. You know, that stock was $320 in February. It is cut in half in the last few months. A lot of negative analysts comments need them cut it to an underperform just yesterday. Twitter also weak. match group. These are different kinds of sectors here within social media, but Snap also weak. The whole social media set is on the downside. More predictable is the casinos on the Macau lockdown story. Of course, you get the usual knee-jerk reaction with Las Vegas sands and wind resorts down MGM, a lot of the other casinos also on the weak side. More interesting is the electric vehicle slash auto slash alternative vehicle space. Tesla is sort of weighing on some of these. plug powers notably weak, blink charging, which obviously is sort of related to Tesla in distant way, weak.

And separately in the same space, GM, that's right near 31. That's right near a 52 week low for General Motors. Finally, I would know that commodity stocks aren't doing anything. They seem like yesterday's story. They haven't had any energy for a long time. Even Freeport McMuran, copper's near a 52 week low. Remember, these were the big movers just a couple of months ago, but they seem to have lost all their buying enthusiasm. The odd thing, of course, Kelly, is we're going into earnings season when these oil companies are going to report the greatest profits in the history of the world, 120% higher profits than they were a year ago. And everyone seems to have suddenly lost interest in it. But that's the stock market, isn't it, Kelly? It has turned on a dime, really breathtaking the last couple of months.

Bob, you're absolutely right. Our Bob Bassani. Let's turn to the bond market. Now, similar dynamic. That drop in commodity prices is pushing yields lower, and they're falling again as investors brace for key inflation data later. this week. The CPI Wednesday, the PPI Thursday, the 10-year yield on the top right there, just under 3 percent today, down about 10 basis points lower on the two-year note as well. Now, oil is closing for the day, so let's get a little more detail on what exactly has been

playing out across the commodity space. Pippa Stevens here with the very latest. Pippa? Hey, Kelly, oil dipping, but ending off the worst levels of the day. Now, some of this weakness is thanks to fears around a demand slowdown out of China. Meantime, Eurasia group saying just now that bears signals around economic fragility are overshadowing geopolitical concerns and supply constraints. WTI down 0.7% at 104.10.Brent crude actually won 10th of a percent higher at 107.12 and natural gas surging another 6.5% after posting its first positive week in the last for an explosion at an Oklahoma natural gas plant as well as warmer temperatures boosting prices. Urquot today asking Texans to conserve power amid a statewide heat wave.

Now, turning to energy stocks, starting the week in the red, Berkshire favorite Occidental is one of the underperformers after Goldman cut the stock to a neutral rating, citing the stocks more than 100% gain this year. Kelly? Yes, 104% in fact, shocking. Pippa, thank you very much. Now, Europe is on high alert as Russia temporarily suspends the flow of gas

from a major pipeline to Germany. Now, while maintenance on the pipeline is scheduled to finish later this month, Germany's energy regulator is concerned that these shutdowns may extend, who knows how long, as their natural gas supplies are dwindling. And that's just one piece of the crisis as Europe's energy problem grows. Let's bring in Worldwide Exchange anchor, our senior national correspondent, Brian Sullivan, for more. Scary stuff, Brian. Well, here too.

I mean, you heard Pippet's amazing that electricity prices are finally getting more attention. We're going to have more on that Nord Stream Pipeline story, which, by the way, has a really bizarre twist to it at the end. I'm going to get to that in just a moment. But right now, let's get to a few of the other key headlines that have happened in just the last 48 hours. We're doing the work so you don't have to. Electricity prices across Europe, they continue to surge to new records. In France, they hit over $400 per megawatt hour, not much lower in Germany. What does that mean?

Well, by comparison today, Boston is paying about $40 to $45. bucks. So parts of Europe right now, 10 times higher on their wholesale power prices. That is leading to more calls to dim the lights of leading French power company executives over the weekend calling for rationing to help alleviate the problem. Literally dim the lights, don't run the air conditioning, crank down the heat, whatever. In Germany, the largest power company is begging the government for a bailout. The company is called Uniper. It is the biggest importer of natural gas in Germany and is now warning about losses up to $10 billion. It's like subprime-like bailout here. It's getting so tough that Bank of America just said Europe is getting into a quote, burn anything at hand

to keep the lights on phase. B of A also raised their price forecast for coal for this year and next year, by the way, coal, already the best performing commodity in the past 12 months. Who would have thunk that? Oh, in Austria, restarting a coal plant at closed two years ago. So, How might this impact people and society well could lead to civil or social unrest? So warns one of the top officials in Europe over the weekend. Sound crazy, Kelly, it's not. Dutch farmers, they're already blocking roads because of crushing new emission standards. And Sri Lanka, yeah, not in Europe.

Their government was just toppled over its energy policies as well as other issues like food production related to chemical fertilizers, which is an energy story. And here you go. This is just for you, Kelly. The most bizarre story of the weekend. Canada just repaired a key turbine part for Gazprom's Nord Stream 1 pipeline. They are now sending it back to Germany, which will then give it back to Gazprom. So despite the sanctions, Canada just fixed a part to help Putin-backed Gazprom send more natural gas to Europe.

Oh, so more on that pipeline story, the Nord Stream 1, by the way, is just what down for 10 days due to maintenance. There's very little gas flowing through it, and the worry is what's going to happen at the end of the 10 days. The gas problem decides that, you know, not turn the taps back on, Kelly, or have more maintenance issues. And if you're on the radio, I'm doing the air quotes. By the way, things could get a lot, a lot more rough. Just a smidget of the headlines that are out. I love the Canada story. We're at sanctions with Putin.

So how does that happen? Why did that happen? Why did that happen? Or how does that not fall under the sanctions? Well, so Tyler, hi, by the way, what they're doing is they're sending, the turbine is not going to be sent directly back to gas prom. It's being sent to Germany. So it's technically a German fix. That's right.

I want to send a package to Kelly, but I have sanctions on Kelly. So I'm going to send the package to you, Tyler, and then you can give the same package to Kelly with my affection. So that's basically what's happening. Yeah. What's it, well, it's an anvil. What's it's the Acme Anvil company is what I'm sending. No, I mean, so that's what they're doing. They're trying what they have to do, Tyler and Kelly, to fill up the tanks ahead of winter.

400 euros per megawatt hour, 10X, what we are paying. Even in Texas today, it's not nearly that high with what they're dealing with. How do you keep the lights on? How do you keep a factory running? How do you make cars? Michelin tire was talking about converting a gas burner to oil or even coal. We're talking about going back to coal to make tires. Is that ESG?

I don't think so. That's WT something. Let me ask you one question about the quote maintenance shutdown of Nord Stream 1 by the Russians. Was that in any way scheduled maintenance? Anybody know that was coming or did this come out of nowhere, which would then certainly increase the odds of your air quotes are correct? Well, okay, as I understand it, sort of splitting the difference. They do need to have maintenance at certain times. it's not like this was long planned as far as I understand it, maybe somebody knows more than I do,

but it wasn't like it happened yesterday as well. You've got this turbine issue, which, by the way, there is maintenance, the fact that the turbine had to be removed and then shipped, of course, to Germany to Canada, Canada, back to Germany, back to somewhere in the Baltic Sea is probably where that turbine has been found. So could there be more maintenance issues? Tyler, absolutely. What's not on that map is Kazakhstan. Okay, CPC Caspian Pipeline Consortium, they're very close to having issues with that pipeline

because a Moscow court is divering over paperwork. That's Kazakhstan, but it's Russian oil. So Russia has the power to shut that off. That's about 1.2 million barrels per day, about one little over 1% of world production. But in this market, Tyler and Kelly, you know every single drop matters. So Putin is playing games using courts. and paperwork and maintenance. He said as much at a speech in St. Petersburg in June

that he kind of wants to cause social unrest. Look what's happening in the Netherlands. I mean, the farmers are blocking roads because they're mad about emission standards over tractors. All right, Brian, thank you very much. It's amazing what's going to. It's a global story. It certainly is, and you can bet that any mischief that Putin can stir up,

he will. Brian Sullivan, thank you. Flown away from the coup. Elon Musk, abandoning his takeover attempt of Twitter. We'll look at the likely repercussions, power lunch back in two, with the Dow falling back into negative territory. NASDAQ down nearly 2%, the S&P, about 1% lower. Elon Musk, Musk walking away from his deal to buy Twitter,

both Musk and Twitter, lawyering up for a prolonged legal battle with potentially damaging consequences. So where does this leave the stock, which is down 9% today? 28% over the past three months. Julia Borsden has some different scenarios about how this all could play out. Hi, Julia. Well, Tyler, none of the potential scenarios

are particularly great for Twitter. Musk's allegations that Twitter is withholding information about bots and is undermining its business by firing key employees raise questions for investors while Twitter taking this to court spells a protracted battle, which of course could be a costly distraction hurting the company's ability to hire and retain top talent at a time when the overall ad business

is contracting and more rival ad-supported services are coming to the market. As to potential outcomes, if Musk negotiates a price cut with Twitter's board, then shareholders could sue accusing the board of failing to do its fiduciary duty. If Musk is forced to go through with the deal, then he could sell the company again. but there don't seem to be any other eager buyers. Of course, he could be allowed to walk if he pays that $1 billion termination fee, or he could be forced to pay damages on top of that fee. Now, that's what Baird's analyst predicts,

is $33 price target reflects 90% probability of no takeover, but with some compensation. Jeffreys warns that Musk's concerns about employee turnover, layoffs and a hiring freeze are indeed warranted, saying without a deal, the stock finding a floor at $23.50. Warning that core fundamentals have been rattled by this process, and there are also headwinds facing the online ad industry.

There's no question. The landscape and the company have both gotten shakier since Musk started buying stock. It's been quite a journey. Kelly and Tyler? It does not seem to me that this in any way is as simple as Mr. Musk seems to think it is. In other words, walk away, maybe pay a billion dollar breakup fee, and it's all over with. I can't imagine that the board or the shareholders or class action lawyers wouldn't get involved here and sue the bejabbers out of Musk.

Yes, no, look, this is going to be a very complex case. The outcome, I do agree, Tyler, will not be binary. It's not a question of, is he forced to buy it at 5420, or can he walk away and pay it billion dollar break-up fee. I think it's likely to be something in the middle, and there are many, many options of how this is going to turn out in between those two polls, those two polarities. Yeah, $54 is what he put on the table as his bid. I think at the time the stock was what, 52-ish? Yeah, it has fallen dramatically since then. And just even looking at the stock continuing to drop today, you have to look at these fundamental questions of what is Twitter worth if Elon Musk is not

involved in it. And, you know, interestingly, look, the stocks down 10% today. You know, last week, I heard a number of CEOs in Sun Valley speculate to me that maybe Musk was the right guy to fix up Twitter and bring some new energy and innovation, make the platform more accessible in the same way that he made Tesla's and electronic vehicles, electric vehicles widely accessible to the masses and sort of kicked off an innovation there. But I think that, you know, that was before this, this big move Friday afternoon. And I think now there's a lot of. lot of concern that this company is going to have a hard time, not only just getting through its normal business, but holding onto employees in this kind of scenario. Yeah, you would think.

And with the stock crumbling like that, a lot of people seeing their wealth crumble with it. Julia, thanks. Julia Borsden. Kelly? Coming up, today's three-stock lunch. We'll take a look at names investors are betting against ahead of earnings. You don't want to miss it. Welcome back. Time now for our three-stock lunch. On today's cocktail menu, some beaten down retailers that the street is betting against ahead of earnings. They each have more than 20% short interest to their float, are down more than 30% from their highs. And here to help us trade them is Ari Wald. He is managing director and head of technical analysis at Oppenheimer.

Ari, it's great to see you. Let's kick things off with guests. Would you buy seller hold, so to speak? Well, here's one we'd stay away from. We'd sell it. Our views are in line with the high short. interest here. It's a stock that's been making lower highs since 2007. Yes, so for the last 15 years, been making lower highs. Now, once again, it's trading back below where it was even pre-COVID in early

2020. So it's just so telling here that the strength when times are good just continues to be outweighed by the weakness when times are bad. It's indicative of structural weakness. And for all these reasons I still see some risk. Now, it's a stock coming into support at $16. That was the March low, but we see vulnerability of a downside break. And for all these reasons, we would rather sell strength into $19 resistance that being the stock's 50-day average. Well, let's go to Sonic Automotive, Sonic Boom, Sonic Gloom. Got a bit of a theme here, Tyler. It's weak, and perhaps not weak enough. We see signs of a topping process at hand. It's coming into an important test of $35 support, the potential neckline of the topping pattern. That was the prior breakout point,

the 2020 rally above the 2019 peak. But it's a stock showing very poor relative strength. It's got negatively aligned moving averages, the 50, 100, 200, 200, all pointed lower. And for all these reasons, see the case that this recent consolidation does break lower. And that support fails to hold. So another one we would be staying away from and selling. Maybe SMH instead of SAAH, something like that. All right, Dick's sporting goods, Ari, what about this one? All right, Kelly, I got some good news here.

I'm not going sell, sell, sell here. I got one. I think this is what makes sense. In this market, a stock like Dix. And here's why. From our vantage point, it is correcting from a position of strength. It is down 39% from its peak. It's underperformed versus the market. It's retraced 50% of its prior bull market. But it's held its breakout levels. It's holding longer term support levels that lead us to believe that on a longer term basis that can continue to make higher lows and higher highs. So I think it's farther along the basing a process here. Here's some levels I'm looking for. It's right into a test of $87. You get above there, you do have now a higher high to work with. I think you can be tactical, maybe buy it in the mid-70s

or some support at $74. But as we think about a recovery in the equity market in the back half of the year, and we're already starting to see some of these growth stocks find their footing, not that Dix fits that. But I think it is one that is properly aligned to be part of that recovery in the back half. And if you have a time horizon, let's say six months out,

year end, I think Dix is going to be higher by year end. All right. We'll leave it there before you change your mind. Ari, thanks so much for all your time today. We appreciate it. For more high short interest stocks that could present opportunity, be sure to visit cnbc.com slash pro. All righty.

Up next, it's not all gloom and doom in the NASDAQ 100. We'll look at the stocks that are trading close to their 52 week highs. More power launch ahead with the NASDAQ losing steam once again, now down nearly 2%. All righty, the NASDAQ 100 is trading about 29% below. It's 52 week high, but there are some standout stocks trading near their yearly highs, and Dom Chu has them. All right. So Tyler Kelly, we focus a lot about some of the stocks that have been hit so hard. But if you take a look at that NASDAQ 100 trade through the lens of the ETF, the tracks at QQ, you mentioned that 29% drop from where we are here.

But again, if you take a look at, we mentioned tech heavy a lot. It's not all technology. some of the bigger companies outside of technology have actually been doing pretty well. So take a look at these because there's roughly a dozen stocks in the NASDAQ 100 that are within 10% of their 52-week or better high at this point. Amgen, PepsiCo, and Monster Beverage are among those that are within 5% of their recent highs, whether they're 52-week, maybe a little bit longer, or even records. You take a look at Amgen, PepsiCo, and Monster Beverage, Consumer Staples companies, and then kind of that health care, biotech trade, there for Amgen. And the single best performing stock in terms of its distance away from highs, check out Vertex Pharmaceuticals. That stock is right now writing an eight-day winning streak.

And it's up. You can see there, oh, 49% over the course of the last year, up another half a percent today. So there are some relative momentum trades that are playing out right now in the NASDAQ 100. They just don't happen to be in technology, though we often say tech-heavy NASDAQ when we refer to that trade. But still, some of those health care biotechers, And context and consumer staples in the NASDAQ are doing pretty well, guys. Forgive me for not knowing why Vertex may have moved that way. So, I mean, this idea, remember, health care has been a huge momentum trade so far. It's been a defensive play, big pharma, all of those types of companies have done very well.

Some of these companies have actually paid a dividend, not some of the biotech names necessarily, but Vertex is one of those stocks that has seen a lot more investor sentiment as things have gotten progressively worse for other parts of that tech trade, guys. All right, Dom, thank you very much. Dominic Chu. And thanks for watching, Power Lynch, everybody. And it's great to have you back. Well, it's nice to be back. Thank you very much.