Power Lunch - Semi slide, oil supply ‘dangerously low’ and Okta’s plunge 9/1/22

Episode Date: September 1, 2022

The U.S. is restricting Nvidia from selling certain chips in China, further pressuring a sector that’s already feeling the heat. Plus, a top oil strategist warns that crude inventories in the U.S. are dangerously low. And shares of Okta plunge more than 30%. Is it a buy on the pullback? Find out in three-stock lunch. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

And it's great to have you for Power Lunch. I'm Contessa Brewer, and for Kelly Evans. Here's what's ahead. The semi-slide. The U.S. is restricting Nvidia from selling certain chips in China, further pressuring a sector that's already feeling the heat from an inventory build and a flowing economy. A top analyst on what's next for that sector. Plus, U.S. oil inventories are dangerously low. That's the call from cities Ed Morris. We'll talk to him about the decline in crude prices and the biggest risk to supply. But first to Tyler and a check on the markets. Thank you, Contessa. Welcome, everyone. Stocks are down for a fifth straight day. That puts the NASDAQ on track for its longest losing streak since February.

The Dow, the S&P, the NASDAQ. There you see them. There you don't. Down about a fifth of a percent on the Dow, three quarters of a percent for the S&P, and 1.7 percent for the laggard, the NASDAQ. Two-year treasury yield, top three and a half percent. It's highest level since November of 20,

The dollar index nearing a 20-year high on the back of this morning's solid economic reports. There you see it. 109.57 on the dollar. Oil trading around 86 a barrel. Arbob hitting its lowest level since mid-January. That's before the invasion of Ukraine. Well, meantime, the semiconductor sector contributing to today's losses as it finds itself in the center of a high-tech cold war between the U.S. and China.

The sector led lower by NVIDIA after the government imposed new. restrictions on the sale of some computer chips to the world's second largest economy. That prompted our next guest to trim his price target on Nvidia from 210 to 180. Let's hear from the analyst behind that cut, Stacey Ragson, Razgen, excuse me, managing director at Bernstein. Welcome back, Stacey. Good to see it twice in one week. It's good to be. I figure I give Kramer one more chance to criticize my fashion sense. We're delighted you're here. You look good. What kind of economic impact? are these regulations likely to have to NVIDIA's revenues?

Yeah, so the direct impact, they kind of quantified. So they said it's about $400 million in the current quarter. We kind of know where they were guiding data center. So it's like 10%, maybe a little more low double-digit percentage of their data center revenues. So that is not trivial, but it is not like earth-shattering, devastating either. So $400 million, presumably this quarter and then in ongoing quarter. Yeah, so we took our target and we took our numbers. done to, I figured it was prudent to just take it, take it out. Now, that may be too punitive.

Again, they're going to be looking for, to try to get licenses. They're going to be looking to try to supply alternative products that may not meet the threshold for the export license requirements. But at the same time, look, I think investors are going to have to more heavily discount China revenues for NVIDIA, and we can talk about for others as well, because you're just not going to be able to get certainty that whatever it turns out to be that it couldn't just go away. I mean, that possibility exists. And that's what I'd like to do. I'd like to turn to others.

For those investors who don't own Nvidia but maybe do own other names in the chip sector, is this a flag out there saying, hey, if you're in this business, if you're selling to China, if you're selling very advanced artificial intelligence-related chips, or others that could be used in defense applications, this is a warning to you. Yeah, maybe. It really does seem the, what they're trying to do here is to prevent the exposure of this stuff

to the Chinese military. So that is what they're doing. Right now, at least the current stuff, it does seem to be isolated to these high-end artificial intelligence chips. It's another thing yet. And for example, like A&D apparently got a letter as well. They are not allowed to sell some data center GPS to China.

For them, the revenues are very, very small, so it doesn't matter. But that letter that they got, does not seem to mention, for example, like server CPUs, where you could argue maybe that risk is there as well, but the government does not seem to be coming down on that sort of stuff right now. So maybe that's a positive. But over time, I don't know.

I don't know what's going to ultimately come under something like this. In the broader sort of macro sense, is this coming now because we are at a point of heightened economic competition with China, number one, number two, because we are concerned that China, has an edge on us right now in AI development. Yeah, so the idea of doing something like this is not new. And in fact, if you go all the way back to the Trump administration,

the Commerce Department, even back then, had been talking about potential export controls on advanced technologies. It was AI. It was also a bunch of other stuff, biotech and some other things. It had actually gone out for public comment. The comment period closed, and then we actually didn't hear anything about it since then until now. But the idea of something that has been around for quite a way. while. In terms of why now, though, I mean, look, you're right, the geopolitical situation is

deteriorating. We are seeing China more as a potential adversary, and certainly we don't want to help them. We don't want to give them the tools, right, to get stronger relative to the U.S. And so that may be some of why now what's going on right now. It's probably also look, like, I know it's not good for the companies, but it's probably, I bet it's a, you know, popular policy, right, quote unquote, being tough on China. And so it probably helps, like, the administration on that front as well. And coming right before the midterms, who would have thought about the timing there? But let me just ask you, does it put them at a competitive disadvantage? And we were talking this week about Taiwan Semiconductor and how it's really in the position of trying

to play neutral ground. I mean, does it give an advantage to Taiwan? These kinds of bands? I mean, like, Taiwan already had an advantage in terms of like semiconductor manufacturing. Again, that's what all the Chips Act stuff is supposed to do. We're trying to reduce our reliance on Taiwan as kind of like one of the sole sources of like, especially leading edge manufacturing. I don't know, these bands and these kind of things give any sort of like advantage like like that to Taiwan. I think there are two separate issues, but they're under the broader umbrella of this geopolitics. Let me let me ask you one sort of policy. One quick final one. I assume NVIDIA is in discussions with the government right now and are trying to,

to quote, educate the government on maybe the reasons why they shouldn't be doing what they're doing. What is NVIDIA's response likely to be here? And would they be arguing, for example, that, oh, okay, we won't sell them that one, but we'll sell them this chip, which is a little less advanced? Well, that's exactly. So, first of them, they are in discussions. And in fact, one of the issues from last night's announcement was it looked like it was going to halt development of their next generation server product, which is called a hopper or the H-100, because a lot of development work happens in China. So this morning, they actually got approval to continue that work. So they've been educating the government. Beyond that, they're doing the few things.

They are going to be looking to potentially sell other products, you know, maybe lower and stuff that doesn't meet the threshold, but might meet customers' needs. They're going to be working on trying to develop China-specific products, which may take some time, but they'll try to do that. And then they are going to be trying to get licenses, because if the real issue is to stop the military from getting their hands on this, they've They've got customers in China. They know what those customers are doing, and they'll try to build the case that there is no military impact. In that case, maybe they can get some of the licenses, but we don't know how long that will take.

All right. Stacey, as always, you have clarified it. Thank you for the insights. Stacey Razgun of Bernstein. Thank you. Our next guest says there's more pain ahead for equities, as rates likely will remain higher than most we're expecting or hoping for. Joining us now is Mike Vogelzang, Cap Trust, CIO to tell us where he's finding opportunity. All right.

So here we are brand new month, but the trend continues. You're looking at the Dow, the S&P, the NASDAQ, down more than a percent and a half right now. Mike, where are you seeing places to invest, given this situation with inflation? Yeah, look, we think in the equity markets, we want to stay relatively short. So think about short duration assets, which means higher dividend, higher quality, not so much paying for growth that's out five or ten years. I think the conversation with Stacey was fascinating because that's exactly the point that we're making. And that is that this is another process or part of the process of de-globalization of the West separating gradually from China and from Russia. Right. We've seen the Russian and Chinese military exercises over the last week or so coming up. So this is only going to continue.

And the reason we've had deflation over the last 15 years or so since the global financial crisis has really been this sort of globalization. You make things and you buy things either where or from which you've got the lowest cost of production. That clearly is now becoming a secondary issue. And chips are a great example. There are others. And we just expect this to continue. The problem is that creates inflation or at least an underpinning of a lower, of a higher level of base inflation, that the Fed may not be able to control. And right now the markets are not thinking that way.

They're thinking generally, in our opinion, that inflation is mostly cyclical. and that the Fed's going to have to, you know, be difficult and firm, which they will be. I mean, it's very clear what Jay Powell has been saying. But this could lead to exactly more of the same types of issues where the, where the U.S. government doesn't want the Chinese military, by the way, and vice versa, to get U.S. things going on. So we're getting to this. There's more and more evidence of this de-globalization occurring. Why do you think that there's going to be more volatility around inflation and the way that the Fed,

is trying to tackle it than there has been historically. Yeah, think about it. If inflation is simply a cyclical event this time around, like it was, say, for World War II, unlike in 1970s, the Federal Reserve can simply tighten, let the natural cycle and base effects come off from inflation and lower inflation sort of naturally, and then the Fed can take their foot off the break a bit. The key here is that this inflation feels like it is beginning. beginning to develop a different sense about it. That is, it's not just about COVID and sort of

the impacts of COVID and the boom in the economy and the stimulus and everything we saw. This is also about some developing and still relatively early, but not quite nascent geopolitical dynamics that are very different than what we've seen in for the last 20 years. Boy, I couldn't agree with you more on that, because I think the fact that Russia is clearly weaponizing energy, clearly doing it, and we're going to see it as we get closer to December when the EU is supposed to wean itself off of Russian oil. And the fact that China will almost certainly weaponize strategic minerals and rare earths and those kinds of things as a weapon of economic competition, that builds in an instability in inflation that the

Fed can do nothing about. Now, can the Fed do anything about? Now, can the Fed do anything about about supply chain bottlenecks? Well, I suppose indirectly, yes, to the extent that it slows the economy, maybe then some of those supply chain pressures abate just a bit. But it all feels to me just what you're saying, that this inflation has a different texture, it may have a different cause,

it may not be subject to the kinds of remedies that have worked in those other periods of more cyclical inflation. It's absolutely the case. And by the way, we like Devon Energy because of that, right? We think that's sort of a geopolitical option in case things get worse from here in a significant way. The whole tenor of inflation is very different.

And the Fed's going to need to get lucky with a number of things breaking in its favor to get control of inflation and our expectation. So, you know, inflation volatility is different than just high levels of inflation. And we've had very, very, very stable. and moderate inflation over the last 10 years with quantitative easing. Now we're in a period of quantitative tightening. You've got this new geopolitical format that's underway that's just, that's simply changing some of the dynamics at the margin for sure.

We just think it makes some sense to play a little defense in equity investing and not, you know, not not jump out ahead of all the sort of super growth things, although at some point those will cycle back into place. But the things we're looking for right now are. are pretty conservative and frankly, relatively, relatively, well, I don't want to say boring, but allow you to sleep at night. Devin, Public Storage, CVS, Health. I would point out that the United States is the only country that has multiple billionaires

who have made their billions based on the idea that Americans just have too much stuff. Anyhow, Mike, sorry for the speeches. I appreciate your time. Thanks, Tyler. Appreciate it, Contessa. Thank you. Thank you, man. All right, coming up, Disney.

There you are. Reportedly taking on Amazon, Netflix, reportedly asking advertisers. for top dollar. And META is looking for new ways to monetize Insta, which will succeed at raising more revenue. What's going to work? We're going to follow the money. Plus, Octa, losing a third of its value, despite posting better than expected earnings. Is it a buy on the pullback? We'll get the trade in today's three-stock launch. And before the break, look at shares at the cloud computing firm Nutanics. It sounds like something we would consume, doesn't it? Delicious. Yes. It's best day ever after issuing an upbeat outlook, more Power Lunch is straight ahead.

Have a shot of Nutansics, ladies and gentlemen. Welcome back to Power Lunch. We've got news today on several big-name media and entertainment companies. Here they are. Disney, Netflix, and Meta. Doesn't get much bigger than that. Julia Borson joins us now to break it all down for us. Let's begin with Disney, Julia, which is considering a membership program sort of in the vein of Amazon Prime. How so? Well, I would correct you, Tyler, based on my conversations with sources. Amazon Prime is all about free shipping and it's all about e-commerce. Disney is trying to do something even more interesting and complex.

They're trying to use a membership program, but they're trying to develop a membership program that could ultimately help connect the experience that people have in person at, say, Disney Parks with the digital experience people have watching Disney Plus. And this is still very much in the works. They haven't figured out pricing yet, but what Disney is looking at is potentially offering members of this program that's in the works, access to exclusive content, exclusive experiences at the parks, and then also potentially exclusive consumer products. So this would be a way to bring together all the different parts of their businesses and get people to pay to be part of a loyalty program. You would also probably get some discounts and special deals as part of that as well.

but could be very interesting. And remember, Tyler, the more data they have about what you're doing, both online and in person, the better they can suggest products you might want to buy in different ways you might want to spend money with Disney. Yeah. Well, we know that AAA does something very similar and does it very well. And all they would have to do, Julia, is look at the casino companies that are using those points across platforms now to try and gender loyalty in their customer base.

I want to ask you about Netflix because here we're getting closer and closer to the launch of the ad-supported service November 1st is that. So how do they go about figuring out what that price should be and when are we going to know? Well, look, there have been reports that it can launch as soon as November 1st. There have been other reports that the ad-supported service won't launch until next year. What we do know is that Netflix is working as fast as it can to figure out its ad-supported service. We just earlier this week reported that they hired Jeremy Gorman, who was responsible for architecting snaps ad business over the past four years and one of her top deputies to get this ad business

off the ground. They are partnering with Microsoft, which is an interesting decision. While there's a lot that still has to be figured out, and I would assume that Jeremy Gorman and the team of people she's going to bring in there will have some ideas about how they want to formulate this business. One thing is clear, and that is that Netflix wants to charge a very premium price for these ads because they only want to have about four minutes of ad time per ad. hour. That's in line with some of the other streaming services. Some have five minutes of ad time per hour. But if you think about how many minutes of ads are on television, which could be 14 minutes of ads per hour, this is a lot fewer ads. They're not going to have ads at the end of shows,

only in the beginning and the middle. So they want to make sure that advertisers are really reaching the right consumers. So the key thing about being able to charge premium prices for ads is they need to know that they're incredibly, incredibly effective. And that's what they're trying to figure out working with Microsoft right now. But it will be an evolutionary process. One thing I hear from sources that Netflix is, however the ad business starts out, they know it's going to change over time as they get better at delivering the ads and measuring their impact. Right now, Julia, our last topic, and this one like the others, all about raising revenue meta, looking for possible paid features within Facebook, WhatsApp, and Instagram. Tell what do you know?

That's right. So I reached out to Meta about this. They did acknowledge that they have created a group to try to figure out new experiences and products that people will pay for. Right now, meta, all of their different platforms are free and ad supported. As we've reported over the past several years, not only is Meta facing an overall ad slowdown right now. Over the past year or so, they've been struggling with Apple's operating system changes, which make it harder for them to target ads. ads and measure their impact, which is, of course, the name of the game. That's what I was just mentioning with Netflix. So it would be great for meta to have more revenue streams and figure out if there are some super users who will be willing to pay extra for additional features. This is something that Twitter is experimenting with as well. So it's still early days. It'll be interesting to see what types of experiences they think or products are worth paying for. But if you could find out more ways to make money other than advertising, that's certainly a win. And look, I think they're not the only ones. Look for all of these different companies, and especially following

on what Twitter's been doing with some of these paid services to try to figure out how to tap into the value of their super users, as they're called, and figure out any potential way to make money beyond reliance on that ad market. Making money is what it's all about. Julia, thank you. Julia Borsden, reporting from California. ahead on Power Lunch, City's Ed Morris, with a serious morning oil inventories running dangerously low. He'll join us to discuss that. Plus, the challenges facing oil and gas are driving the development of alternative energies. Up next, we'll hear about a hot housing community cooled by geothermal.

Power Lunch will be right back. While California is bracing for a historic heat wave, Texas is suffering through what may be the hottest summer on record, New technology and housing aims to make homes more weather resilient and more environmentally friendly. Diana Oleg joins us from just outside Austin with a look at some of those technologies and how they're being implemented. Hi, Diana. Hi, Contessa. Yeah, I'm standing on top of the largest ever residential geothermal grid. Every home in this 2,000 acre development will be heated and cooled by the system, which is powered by solar.

So if you just travel down below your feet, 30 to 40 feet, it's a constant temperature all year round, 72 to 74 degrees. So we want to access that because that makes the heating and cooling equipment all the more efficient. EcoSmart Systems, a subsidiary of developer Torres Investment Holdings, pumps water deep underground to access that mild temperature through the water. And these are the pumps that are used to distribute the water throughout the entire geogrid. A geogrid that will eventually heat and cool more than 7,000 homes. Before any construction, boreholes about 300 feet deep are drilled in front of every lot to circulate the temperate water to each home. Thurman Homes is one of the builders. With the investment of a geothermal, the day you move in, it's going to be saving you money.

Just ask homeowner Jennifer Abamante. We essentially have no power bills at this point. The cost of a home here is about $10,000 more than a home. a comparable home, but buyers seem willing to pay and add features like a battery backup. It's been really nice when we've had even minor outages to not have to worry about things continuing to function. And the recently past inflation reduction act is a massive windfall for commercial geothermal development tripling the tax credits.

The government backing also gives investors that essential certainty that they need to push this technology to a much larger scale. Back to you guys. It's so interesting. Don't you think, too, thank you, Diana. I just think it's amazing, too, Tyler. If you look at what it's costing for natural gas or for oil to heat your home, how much that drives people to consider new technology that maybe they would have thought was out of reach before.

Yeah, and if it's a $10,000 increment to the house price, I wonder how it works in all parts of the country and what the substrata is like everywhere. It's different if you have to blast out with TNT. But if the increment to cost is $10,000, in many transactions, that's, of course, that's a lot of money for anybody, but it's not. But over the life of a mortgage, it's not material. Yeah. It really isn't.

All right, let's go and welcome back, Christina Partsenevolous for the CNBC News Update. Christina. Well, thank you. Good afternoon, everyone. A judge has just denied Senator Lindsey Graham's attempt to avoid testifying before a Georgia grand jury looking at efforts to overturn Joe Biden's 2020 election win in the state. But the judge put restrictions on what Graham can be asked about. The case now has to go back to an appellate court.

In Florida, hearing is underway right now on Donald Trump's request to have an independent decision maker review the documents seized by the FBI during its search of Marlago. The Justice Department opposes the motion saying it isn't necessary and would delay its investigation. A supporter of Donald Trump could be facing up to eight years in prison after pleading guilty today to spraying a chemical irritant into the face of Capitol Hill police officer Brian Sicknick on January 6th. Siknik died of natural causes soon after, but the medical. Examiner says the day's events played a role in his death. And today, government agents searched properties connected to Russian oligarch, Victor Vesselberg, including a Park Avenue apartment, along with sanctions already imposed on him.

The DOJ is looking at allegations of bank fraud. Tyler, back over to you. Christina, thank you very much. All right, here's what's on the menu for the rest of our broadcast. Our cookbook series continues today with a look at the delivery names, like DoorDash, among them. And the big three movers will have those. in our three-stock lunch.

Meantime as we head to the break, a look at the Dow, which is now positive. Oh, by a heck of a lot there, four-one-hundredths of one percent. We'll be back in two. Less than 90 minutes left in the trading day. We want to get you caught up on the market, stocks, bonds, commodities,

and what could happen next with oil. But let's first start with Bopasani at the New York Stock Exchange. The Dow has turned positive. Hallelujah. And we're not far from the S&P 500, either contest. And you can thank basically,

consumer names that have moved up. So let me just show you some that are in positive territory. Home Depot's had a nice little run. We were what, too, oh, I don't, too, I can't see the number here, but we moved up two or three dollars on Home Depot. We were 289 half an hour ago. So that's a nice move up. McDonald's moved into positive territory. Johnson and Johnson, Procter and Gamble, these are all consumer names that have helped us in the Dow. Elsewhere, not great news for the chip sector. Obviously, NVIDIA is impacting. That's the biggest decliner in the Dow about the restrictions on the China AI chip from the U.S. government there. That's bringing that stock down. It's new low lamb and AMD. Micron has just gone positive. That's been negative most of the day.

A lot of people have been trying to go short, these semis, go long software. That's been a big play here. That's not working today. Obviously, Pager duty, the earnings there are coming Z-scaler, data dog, crowd strike all down rather noticeably. So that trade is not going very well. And there's a lot of confusion about the messages that are out there. Look at these energy stocks here down again today. So we're in a sort of down move on that. That's happened several times this week up and down. But look at these leading indicators. So here you have oil here now. We're at the lowest levels almost since January moving down on oil. Crudes down to 86 right now. And that implies obviously lower demand or inflation. And then they have the two-year breaking out here.

And what does that imply at this point? Well, you know, the Fed's going to keep raising rates and potentially higher inflation. So a lot of confusion about the messages. One fellow this morning said, what are we expecting now? Locust spot, but we're going to get boils and frogs and other things because we've got a lot of issues we're dealing with right now. With the dollar at a 20 year high, 10 year yield over 3%, China COVID lockdowns and the downtrend inequities. I think the problem here, Contessa, is the other issue, of course, is it's a no-bid market. Three quarters of the people I talk to are out right now. So we need more adults back in the room. maybe that'll make a difference. I'm not trying to gloss over the macro problems, Contessa.

They're very real, but this is about as light of volume as you're going to see. Well, if you're talking historic plagues, nobody wants to be around for that, Bob. So thank you. Biblical, plagues of biblical perspective. Let's go to the bond market. You just saw there the two-year. Now we're seeing yields sharply higher because money's also coming out of bonds. Fresh 15-year high for the two-year. I'm sounding like a broken record here, Rick Santelli. Well, that's because Jay Powell is a bit of a broken record with regard to his inflation fighting. The issue is it's been five sessions since his speech on Friday, and the market investors are believing him a whole lot more. You're exactly right.

Let's look at a five-day chart of two-year no yields. They closed up higher every day. And as you pointed out, this is going to be the highest yield close since November of 2007, nearly 15 years. But here's what's interesting. It's the only maturity to be trading above its mid-June high. Look at a tenure from June 1st. You could clearly see it hasn't traded above 348 yet, but yet it's getting close. As a matter of fact, threes, five, sevens, tens, 20s, 30s, none of them are trading above their mid-June high.

So the two-year has broken out. And if we look at what's going on with regard to Euro versus Dollar, it's all about foreign exchange today. The euro is 57.6% of the dollar index. It is on pace for the lowest close in over 20 years. Look at the dollar versus the end. It's on pace for its lowest close against the greenback in 24 years, August of 1998, which means, of course, the dollar index is about ready to close at a fresh 20-year high. Contessa, I'm sorry.

I lost your name for a second. Back to you. It's not the first time it's happened to me, and it probably won't be the last. Well, no, no, listen, Rick and I go way back. I know who I'm talking to there. Rick, thank you for that. Oil closing for the day. Lower again, nearing levels we haven't seen since before Russia's invasion of Ukraine. Pippa Stevens joins us now from the commodity desk. What are you watching, Pippa? Hey, Contessa, while oil is tumbling again, down another 3% as new lockdowns in China hit prices, an unexpected bounce back in Chinese demand had been central to the oil bullcase. And so these new

lockdowns are throwing a wrench into that bullcase. China is, of course, the largest oil importer in the world. Also, the dollar is jumping, and that can lead to soft demand because it makes oil more expensive for foreign buyers. With that, let's check on prices. WTI down 3.5% at 86-47, Brent crude right around 92-20 for a loss of 3.6%. Now, meantime, Germany's economic Minister are saying today that the country should not rely on gas deliveries through the North Stream 1 pipeline this winter. That contracted down about 4%. And finally, take a look at aluminum prices, sinking to the lowest since April 2021 on demand slowdown fears. Contessa, back to you. But thank you for that. Let's dive deeper into the energy trade now. Our next guest says U.S. oil inventories are dangerously low.

And a tough hurricane season could have a scraping the bottom of the barrel. Let's bring in Edmorse. global head of commodities at city ed it's good to see you today appreciate you being here let's talk a little bit about why we're in such a dangerous scenario what numbers are you looking at that make you label this dangerously low inventories well we look at the days of forward demand cover but we also look at historical levels and we're down you know well below the last five years in crude oil and gasoline diesel's just about there and we keep depleting our inventory at least through this so-called summer driving season. Our demand is way down, by the way.

Our demand is down two million barrels a day, but we've become the largest exporter of crude oil and petroleum product in the world. So is that why our reserves are down? It's not because demand is up. You just said quite the opposite. There hasn't been a summer driving season. Absolutely.

It's really a dramatic shift where we've become a 10 million barrel a day, gross exporter. At times, we've been over 9.5 million barrels a day for a lot of the summer. That contrasts with a significantly lower level. And just look at crude oil, January and February, we were exporting about 2 million barrels a day. In the last two weeks, the prints that we got from the government were 5 million barrels a day of fruit exports a record last week, with a week before last and this past week with the data that came in yesterday, we were at $4 million a day. So we're exporting it because Europe is moving away from Russian supply and they have nowhere else to go. The Saudis are not delivering them more crude.

They have destination clauses on where they sell oil to so nobody can resell to Europe. So they're pulling basically out of the U.S. And surprisingly, Asia is also pulling out of the U.S. So we're supplying the world and we've heard from the White House in recent days. days, we know that they're contemplating ways to shut off those exports or to dramatically reduce them to deal with that inventory level, particularly as the September hurricane season is right upon us. Okay, let's talk a little bit about the things that we could see change this scenario and either ease this tightening supply somewhat in the U.S. or make it worse.

You mentioned the hurricane season. We know that forecasters, it's been a quiet season so far, but forecasters are starting to look at a couple of storm systems. systems. September is typically the start of the height of hurricane season. What else are you looking at as being crucial factors in whether we have enough to get us through winter? Well, the other factor is really a global factor, and that is the palpable probability of a disruption to supply in Iraq, which has had no government since last October when the elections took place. and we had the leading party pull out of the political system last week or allegedly pulling out. We don't know what's going to happen there. The level of violence is subsided, but it's not clear it can stay at that low level. Libya has production up a million barrels a day from the lows, but military activity is escalated there again.

So between those two countries, we could have a two million barrel a day drop due to disruptions to supply on their own home front. And then there's concerns about Russia. You know, the not all of Russia is going well in terms of domestic production. Certainly, Russia is gaining a lot in the way of revenue, but they're losing markets. And as a result, they have had to sell it a discount to other production. We've seen that discount falling down now. But we've got Europe saying they're going to cut off all Russian supply of oil. by the end of the year. And that means where do they go? And that would be a pull on the U.S.

So the fourth quarter is got these wild cards that are by no means pulling us out of risk. Ed Morse. We appreciate your expert perspective on all this. Thank you. Thanks for having me. All right. We've heard from restaurant owners this week about the shift from dining in to delivery service since the pandemic. So we are taking a look now at the delivery stocks. In today's Power Lunch Cookbook, we'll name names and tell you which ones are good look at next. Welcome back, everybody. We are nearing the end of our Power Lunch Cookbook series where we've highlighted overlook stocks in the restaurant business and related ones. Today, we talk about the delivery stocks, specifically third-party delivery names like DoorDash and Uber Eats,

here to help us trade them. Andrew Boone, managing director at JMP Securities, a Citizens Company. Andrew, welcome. Good to have you with us. Great. Thanks so much for having me. Which of these two companies do you like more and why? You know, I think Uber is really interesting here. There's a path to $5 billion of EBITDA, as we talk about 2024. I think both have made clear strides in terms of improving profitability. You've seen that clearly demonstrated in the U.S. And so as profits have become more important in the market overall,

I think both have a very clear path to show profitability. In terms of which I favor, I tend to lean more on DoorDash. We view DoorDash as the more innovative of the two companies. and believe that things like DoorDash Drive as well as some of their capital programs are just very unique and create additional optionality in terms of revenue drivers for the business. I would say the one thing that I notice, and I have a 16-year-old who with his friends uses these services all the time. DoorDash is the brand in this space. DoorDash has strong brand association.

Yeah, definitely. I mean, I think you see that in terms of the consolidation of the restaurant delivery space overall. DoorDash has 10 million subscribers. Uber has 10 million Uber 1 subscribers as well. But remember that that's across seven different countries at this point. And so if you look at overall share, DoorDash is definitely the leader domestically. And look, the U.S. is just a vastly important market that's driving a lot of the profitability for food delivery overall just globally right now. Let's talk a little bit about what's happened to these share prices.

this year. You've got Uber down 33% year-to-date, DoorDash down almost 62%. It seems like there would be, if you believe in these companies, even in a post-pandemic world, it seems like there would be a lot of upside. You think, in fact, DoorDash, you've got a target of 150 bucks on it. Yeah. I mean, we do think there's a tremendous amount of upside here. Clearly, growth stocks have come in. Both Uber and DoorDash kind of fall into that bucket. And then additionally, there's a lot of just concern overall around the consumer weakening. DoorDash talked about that this most recent order in terms of the number of items placed in an order decreasing. But what you saw across Uber as well as DoorDash is that the frequency of orders continues to go up. And so one of the

key learnings and one of the things that we just think is a permanent kind of just trend coming out of COVID is the fact that the consumer has been habituated to food delivery. And so we think both of these businesses are well positioned and kind of a post-COVID world, if you will. Andrew Boone, pleasure to have you with us. Thank you. Thank you so much. Still to come, cybersecurity firm, OCTA, down more than 30% today. We'll hit that, and other key movers in today's three-stock lunch. Time for today's three-stock lunch. We're trading three names, making outsized moves after earnings. Octa down more than 30% after saying it's experiencing problems, integrating a recent acquisition.

Hormel down about 7% after saying it expects higher input costs to persist, and five below, higher on a share buyback program and optimism around future store growth and what's not to like about the candy section in that store. Let's bring in Steve Grasso, Grasso Global CEO, a CNBC contributor to trade these names. All right, Octa says these were short-term issues, but I guess the investors don't really buy that, Steve. Yeah, not only that, Contessa, when you look at the price as far as, far as put in a point of reference, we're back way below the pandemic low was around $88. Look at where the stock is trading today. So you guys have been covering this. We're back to like

2000, late 2018, early 2019 levels. So if this is just a little bump in integration, the market hasn't got that memo yet. And there is a learning curve literally when you're training new hires. If you've lost some workers due to attrition, you have to train a new sales force. How do you train that sales force? Take some time, take some knowledge, and the market's believing that it's going to be a little bit long-winded. Obviously, the stock was trading below the 50 and 100-day moving average, and to the point of the obvious, it's trading way below all of its moving averages. If you want a bottom fish, which I like to bottom fish a lot, you have to wait on a three-day rule, Contessa.

So that means that it has to hold the low of today. And last time I checked, it was 5812. It has to hold that low for three days before you put money to work. Okay. And it's back from that 5812 now at 62 and change. Let's move on to Hormel. Always good to feed new salespeople foods from Hormel as well as part of the trading. Is Hormel's issue here a technical issue or?

fundamental problem with the business? Yeah, so that's a good question, right? And I always believe that the technicals reflect all of the fundamentals, Tyler. So when you look at this one, you also have the same issue. It was above all of its moving averages. Now it's below. This is also a three-day rule here. But more importantly on fundamentals, if you look at the fundamentals, Tyler, to your point. Revenue up 18% year over year, net income up just under 15%, operating income up 19%. Fundamentally, it sounds like a great story. When you look at it technically, or when you read a little bit deeper into what the CEO said, these could be transitory issues that they're dealing with as far as inflationary pressures on the stock. I'm a firm believer in. Let's wait until those

inflationary pressures, at least flatten out. They don't have to become tailwinds, but let's wait till they flatten out a bit until we dive in. All right. And our final name of these big movers today, five below. What do you think, Steve? Yeah, Contessa, I think you nailed it on the way that you introed it. This one is about expansion. I think because if you look at all the fundamentals on this one, they weren't that great, but if you look at the expansionary plans, they're trying to add 160 new stores this year, 200 new stores next year. They're going to follow a different pattern. It's going to be five and beyond or beyond five. So it gives them a little bit of more cushion to increase their margins. This is a name that I think people are looking towards the future,

not the present right now. I would be a buyer of this one. Bounced around the February 2020 levels as support a couple of months ago. It's above that. It's trading between the 50 and the 100th day average. The 50 is at $128 and the 100 days on 136. So I would look for it to trade between there. Breaks above, look for higher gains, breaks below, exit the trade. All right. Steve Grasso, sounds delicious. Thank you, sir. Up next, consumers aren't only dealing with sticker shock at the grocery store, but also shrinkflation. We will go under the microscope on that one next. All right, over the past year, we have said the word inflation a lot, often preceded by the word transitory. But off air, we've said it as well, and a new term has emerged to describe a different inflation-adjacent trend.

Dom Chouin joins us now with more. Hey, Dom. Flation is still part of the word, and that word is shrinkflation. Now, so what exactly is shrinkflation? It is inflation in a way that you may not notice it. And the reason why is because it is about consumer products actually getting some. smaller in weight, size, or quantity while prices stay the same or increase. So it's what some people call the candy bar effect. They still charge you to say hypothetically a dollar for the candy

bar, but instead of, you know, eight ounces, it becomes six ounces or five ounces instead. So it's something that they're worried about here, and the changes can be subtle. And the reason why it's important right now is because according to a recent poll and survey from morning consult, roughly two-thirds of Americans are worried about shrinkflation. So you may not see it in the price, but you can see it in the actual size. Now, where are they seeing it the most? Well, half of respondents say they already see it in snack foods, candy bars and things like that. Also, 40% in the pantry. Not all a bad thing, not all, not for my waistline. Right, right, yeah. But you're still paying the same price. That doesn't sit well with some people out there.

Frozen meat, bread, all places where they're seeing it. Now, what's interesting about this, though, if you take a look at one of the other data sets they collected for, besides where they're actually seeing it, it's actually what they're doing. in response to it. So if they are charging me the same or more for the similar amount of product or less, well, here's what I'm going to do. I'm going to try a different brand. Half of respondents said that, nearly half said that they're going to buy a generic or private label product. I can tell you, our household has done that with things like staples, OJ, eggs, and milk. What's also curious here is that people are going to buy bulk more often. About a third of respondents

said that. That's Costco. That's Sam's Club. And we learned today at Sam's Club is already going to increase their prices for membership. So all of these things factor into this shrinkflation story. By the way, this is where the comparison shopping by, say, product ounce comes into play, because then you don't have to do the math yourself. The grocery store is doing it. Tom, thanks. Sounds like a whole curb your enthusiasm episode right there. Thanks for watching, Power Lunch. Closing bell starts now.