Power Lunch - Signs of a slowdown, consistent dividend growers and the CEO of Advance Auto Parts 5/24/22

Episode Date: May 24, 2022

From Snap to Best Buy to housing, there are signs the economy is slowing. But how concerned should investors be about a coming recession? It’s the big debate looming over Wall Street. Plus, the CEO of Advance Auto Parts on the impact of rising gas prices and how he’s deflecting rising costs. And, 3 stocks that are paying investors back. Our trader tells us if their consistent dividend growth makes them good buys. 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 for a Tuesday. I'm Tyler Matheson, and here is what's ahead on what promises to be yet another busy hour. It's a rough day on Wall Street yet again, but stocks are attempting a bit of a comeback off the lows. Still, profit and sales warnings from companies are spawning recession fears left, right, and center. This hour, the outlook for growth here and around the world. We'll examine the charts and whether the technicals are pointing to a bottom, and we'll look to consistent dividend growth. as potential safety plays. First, though, Kelly's got a check on these markets. I do, Tyler. Thank you very much. Hi, everybody. So we're off session lows, but it's still negative. The Dow's down 135, the S&P down 53 to 3920. The NASDAQ down more than 300 points right now. It's off the lows,

though, as I mentioned, this two point, excuse me, 6% drop compares with about a 4% slide earlier on. At one point, more than 90% of the NASDAQ 100 components today were negative. And the 10-year yield, all the headlines with this sudden move lower right around 930. 275 is our current level. We got down to about 273. 272 is a spot traders are watching. And if we go below there, a lot of people are saying next stop could be much lower. Ty.

All right, Kelly, economists are debating the risk of recession, stagflation, overall growth concerns. And today we get data points from different segments of the economy that could be pointing to a slowdown. On the digital front, you got Snap. The CEO there warning that the macro environment has deteriorated further and faster than we anticipated the stock, falling in almost unheard of 40 percent today. The Best Buy CEO says she expects softer demand to stick around for a while. That would be Best Buy and Abercrombie and Fitch issuing a weak outlook as well. Let's get to homes now.

Sales of newly built homes sank in April to the slowest rate since the start of. the pandemic. And on the industrial front, we've got a wave of PMI data across the globe. It came in weaker than expected. And those purchasing managers, they do not mess around. Our reporters are covering the stories. Julia Borsden on SNAP, Courtney Reagan on retail, Diana Olik on housing, Steve Leasman on Global Growth. And Julia, we begin with you. Well, Tyler, Snap shares down 41% on the company's warning that second quarter revenue and adjusted earnings will likely be below the low end of its guidance range that it provided for the quarter just a month ago. Snap saying in its 8K filing, quote, the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month. As a result, while our revenue continues to grow year over year, it is growing more slowly than we expected at this time.

Now, this warning that revenue growth will be below 20% is a dramatic slowdown from the 44% revenue growth that Snap said it saw at the beginning of the year before Russia's invasion of Ukraine. Jeffrey's weighing in saying that this is a sign that a, quote, macro environment that will likely impact the whole ad industry, and it is highly unlikely that the weakness is isolated to SNAP as we expect macro conditions to impact all digital ad names. SNAPS warning and analyst's concern about the whole industry means likely to feel this impact, sending those other ad-driven stocks plummeting. Metashares down 8.5%. Pinterest down nearly 22%. Twitter off 4%. And even Alphabet and Amazon are lower alphabet down nearly 6%.

And Amazon down over 3%. Kelly? Yeah, huge moves, Julia. Thank you very much. Let's turn now to retail where CEOs are issuing the same. warning about the economy. Courtney Reagan has those comments for us. Corrid? Hi, Kelly. Yes. So most retail CEOs are certainly using caution in their tone, but stopping

short of forecasting a recession. On its earnings call Best Buy CEO, Corey Berry said it's, quote, factoring in elements of stock or demand, but we are not planning for a full recession, whatever full means, acknowledging, quote, macro conditions worsened since giving its guidance in early March, which led to lower sales and higher supply chain costs. Barry also, acknowledge the duality for consumers right now with relatively strong balance sheets. They continue to spend. Wages are up and unemployment is at record lows, but are also lapping stimulus income with higher gas and food prices, rising interest rates and mortgage rates, recession fears, stock market volatility, geopolitical uncertainty, and gradual shifting from

spend at stay-at-home purchases to more experiential spend on services and those associated activities. Now, on the Abercrombie earnings call, CEO Fran Horowitz, told investors its, quote, an interesting time and pointed out low unemployment in the United States with high wages and a desire for all of us to return to normalcy, but also in a, quote, extremely inflationary period, which she expects will weigh on confidence and its company sales, though this was the best first quarter for sales for Abercrombie since 2014. Still, shares are down 31%. Tyler. All right. Thank you very much. Courtney. And now let's move on. to housing, which everybody knew was starting to slow, but not this much, this fast.

Diana Oleg has the latest numbers for us. Di. Yeah, Tyler, I had to look at this one twice when it came out. Sales of newly built homes dropped over 16% month to month in April, down nearly 27% year over year to the lowest level since April of 2020. Those two terrible months at the start of the pandemic for home sales, mortgage rates clearly a factor here as shot significantly higher in April when these contracts were signed. Since newly built homes are generally pricier than existing, it means buyers are more likely stretching.

Still, and this one is surprising, the median price shot up nearly 20% year over year to well over $450,000. Builders have been saying that they continue to have pricing power because of the shortage of homes in the existing market. But that may be short-lived. Since the supply of new construction jumped to a nine-month supply from 6 in March, that is a lot of supply. Six is considered balanced. Needless to say, the builder stocks are not taking this well, and they've been pretty beaten up already. The home builder, ETF, ITB, way down. And big names like Lenar, Pulte, and D.R. Horton, just adding to the pain, they're all down well over 30% year-to-date on these higher interest rates.

And finally, Toll Brothers, the luxury builder, they're set to report after the bell today. Also way down. We'll be watching Toll for any comment on rise in cancellation rates, which we're starting to hear more about now on both new and existing home sales. contracts. Back to you. All right, Diana, thank you. So where does all of this leave the economy overall? Steve Leesman is here with some new economic data out today and what it's telling us. Steve? Yeah, Kelly, we had some notable misses in the economic data to go along with the big housing miss that Diana just told you about, suggesting definitely some loss of economic momentum. It suggests also that high prices and rate hikes are catching up with companies and the economy

and potentially the consumer here. Flash U.S. Services Business Activity Index at 53. and a half. That's a four-month low. The manufacturing output index at 55.2, that's a three-month low. Now, note, both still signal expansion, though, of the economy just at a slower pace. Richmond Fed, though, not signaling very much at all, down 23. That's the lowest since the pandemic began here. But so Michael England, Action Economics writes, we've had a bad couple of days for the U.S. growth outlook, and we've trimmed our Q2 GDP growth estimate to 3.4% from 3.6. with emerging downside risk. That said, several economists remain upbeat on the consumer and spending despite warnings

from Walmart and Target last week. Over at Barclays, they say the narrative of the demise of the U.S. consumer is greatly exaggerated. Even with higher prices flattering the nominal numbers, aggregate data suggests that the U.S. consumer is still spending at a healthy clip and even on goods. Some slowing was inevitable here as companies were not going to be able to pass along higher prices forever and higher rates are now working their way into the economy. The debate remains whether the economy can escape with just a slowing or if it's headed for an outright or full recession, Kelly. Our next guest is going to wait in on that. Steve, thank you very much. He says this isn't just a

slowdown. It will be a recession. And the bond market is saying it will start sometime in 2023. Let's bring in Sri Kumar, Sri Kumar Global Strategy's president. It's great to see you again. And, you know, we've been sort of following, I think you've well captured this turn in yields when we were at, you know, historic lows. And then we shot higher. And as you've written and talked about, the Fed was behind the curve. Where do rates go from here? What is the bond market telling us? And what happens with this recession?

Kelly, those are all great questions. I think the Fed is in an impossible situation. Having miscalculated inflation for so long and having delayed the, the rate hikes and having inflated the balance sheet, what they find themselves in today is that inflation is very high. A lot of it is beyond their control, like the Russian war, the Shanghai shutdown, those are causing it. So the Fed is very, very much behind the curve. So that is what you see taking place. In terms of what it does to the economy, this reminds me so much, Kelly, of how we were in 2006, 2007.

when people were still saying, oh, is there ever going to be a recession at all? And recall that in July 2008, when we were at the verge of a big drop, the European Central Bank increased interest rates in the beginning of July, saying the global economy is very strong. I find a lot of similarities. Yes, the labor market is very strong, but I don't think it is going to stay that way. I think the Achilles heel in all of that, Kelly, is the fact that, inflation is way, way too high. It's going to take a lot of Fed tightening to bring it down

anywhere near 2%. They may not be able to do that for a while, and that is where the risk to the economy lies. The risk because it's just going to run hotter than the Fed wants for longer, what is the risk that the Fed has to basically settle for that higher inflation and a slower than optimal economy, which is sort of the definition? of stagflation? Is that what we're in for, including, in your view, a full-fledged recession sometime next year? Tyler, that is a great question. The Fed could have settled for a higher rate of inflation persisting for a longer period of time. Let's say they would have settled at three or three and a half percent and say, we are going to be there, not a two percent. But that option was lost

in the middle of 2021. They have since been. inflating the balance sheet, they have continued with zero interest rates for almost one year longer, which means today the Fed does not have that option of accepting a slightly higher inflation rate, the inflation rate is going to be significantly higher. Of course, Jerome Powell can say, I didn't anticipate the Russia-Ukraine war, but nobody does. But you do not conduct monetary policy, assuming the world is going to be perfectly stable to allow you to do your tightening. So by delaying it, he lost degrees of freedom and now is going to force to tighten into a slowing economy. We saw the 2 to 10 yield curve already invert once. We have come back to positive

level, Tyler, but I think we are going to invert again. And that's what happened repeatedly in 2006. before the Great Recession began December 2007. If I accept your hypothesis here of a slowing economy, potentially a recession with higher than optimal inflation, what should I do to protect my capital or take advantage of pockets of opportunity? What should I do? You should behave very differently than you did

in past recessions and past periods of high inflation because today you're going to have a combination of both of them. That means in your behavior, you cannot just go into bonds because the bonds will lose value due to inflation. You cannot go into equities because equities will lose value because of a recession and fall off in corporate earnings. So what you do is to look on the short end, at short duration, high-grade fixed income paper. You look at cash, you look at gold. And longer term, you look at commodities. You look at globally diversified areas to go into, like real estate, so you can protect

your value against inflation for the next five to seven years. So this argues for you to go away from a typical 60, 40 investment strategy, Tyler, and to be very innovative in terms of where you're going to be over the short term and the medium term. All right. That's the prescription from Sri Kumar. Shri, good as always to see you. Thank you. Thank you, Tyler. You bet. All right, coming up, advanced auto parts citing rising costs and supply chain issues and it's just related earnings report.

Release earnings report, I should say. The stock down 26% this year. We'll ask the CEO if there are any signs that things are starting to ease. And later, looking for income as volatility spikes. Should you hide out in companies that consistently grow their dividends? and here's a look at the Dow, which is close to going positive. Look at that. All right, shares of advanced auto parts off about 1% extending its month-long decline. That sent the stock down 17% over the past month. The auto parts retailer reported a slight decline in quarterly profit as it contends with higher costs and questions about the health of the consumer. Joining us now for Power Lunch as exclusive is Advanced Auto Parts CEO Tom Greco.

Mr. Greco, welcome, welcome back. Good to have you with us. Part of the reason for the numbers was comps, wasn't it? I mean, you had a tremendous first quarter in 2021 as the economy bounced back. Oh, good afternoon, Tyler. Thanks for having me. Yeah, we had, we comped on top of about a 25 comp last year. We knew the first quarter was going to be our most challenging of the year.

And we're really pleased that we're able to affirm our full year guidance at a time that's been pretty volatile for broader retail. And it embedded in there is Com Sales Growth for the full year. We just had our eighth consecutive quarter of Com Sales Broke. We guided to margin expansion. There's very few retailers out there that are doing that. And then continuing our track record of substantial cash returns for our shareholders, we returned over $400 million to shareholders in the first quarter. So in the current environment, being able to pop a double-digit EPS here in 2022 on top of 48% growth last year puts us in a pretty rare air as far as retailers. The comp sales growth was small, but it was growth as you point out. Let's talk a little bit about

margins because that is on every CEO's list these days. How are they being affected by rising costs of materials, of wholesale goods, of labor, and how have you been able to maintain or even expand margins, as you say you plan to do? Yeah, well, it certainly is a unique environment. And you heard it from your previous guest. I mean, we're fortunate that we have a number of initiatives inside of our company that not only mitigates the inflation that we're seeing, but actually enable us to cover that and actually grow our margins.

And it's everything from expanding our own brands, I'm really excited about our own brands that we have at advance. We have Diehard. We have Carquest yesterday. We announced a first-to-market, the very first automotive company in the world, to have a hybrid electric 12-volt battery that's optimized for electric vehicles. I mean, every electric vehicle, of course, has a lithium battery, but they also have a 12-volt battery.

And now we've got a product under the Diard brand that nobody else will have. So we have a number of initiatives that we have that, able us to grow our margins in spite of the inflationary pressures that we're seeing. Yeah, I'll confess, Tom, I can't quite understand a world in which the home builders are trading at four times forward earnings and the sales are dropping at least new home sales. And yet the auto stocks, you know, you guys have this kind of upbeat reaction and yet Best Buy and some of the others, you know, they, I just can't quite figure this one out. I can't figure out what it's telling us about the consumer, about the durable goods cycle,

about the strength of the economy. It feels like every sector and every data point we turn to has something completely different going on. It's a great question, Kelly. I mean, we're fortunate that we operate in a great industry. I mean, I think you referenced a broader shift that we saw during COVID from essentially experiences to goods. And there was clearly some companies that benefited from that disproportionately.

And then there were some that were adversely impacted, a hotel, an airline, a restaurant. We were neither of the two. We were sort of in the middle. And because of that, as the shift from goods back to experiences occurs, you know, we still are going to be able to grow. And that's why it's a great industry and a very resilient one at times like this. Do you see, let's talk a little bit about your customer and what pressures on their own personal budgets and pocketbooks and wallets they may be feeling. and one of them has to be the pinch of higher gasoline prices. Is there any connection between that and your business? Does it help you? Does it impede expenditure on auto parts?

Do people postpone the work they might do? Because, well, I just filled my little car with $63 worth of gas this morning. There's a lot of variables there, Tyler. I mean, clearly, a rising gas prices have the potential to impact miles, driven, but there is a number of other variables that are going to offset that. And by the way, we have not seen that to date, even in March. Miles driven actually grew. So I think it's a little bit to Kelly's question where people are getting back out. They're going to, you know, sporting events, or going to movies, or going to restaurants, things that they hadn't been doing,

which is putting miles on their car. And so we are seeing, you know, new vehicle shortages still. That's going to extend into 2023. That means the fleet ages. They're going to need more repairs. So the key drivers of demand are still favorable for our industry in spite of the things that you're talking about. Yeah. All right, Tom, thank you very much. We appreciate it and continued good fortune. Thank you much for having me. You're very welcome. I have a soft spot for advanced auto parts. It was my first college reporting trip when we were learning journalism, Rona, Virginia. Coming up, we will continue watching these markets with stocks well off their session lows. The Dow is down 98 right now.

The NASX only down 2.6%. Plus, looking for safety. We are searching for yield amid all of this volatility. We'll trade the big dividend growers in today's three stock lunch. They're all outperforming today amid the selloff. You can see a glimpse there. And as we had to break during May, we're celebrating Asian American and Pacific Islander Heritage and featuring some of our CNBC teammates and contributors.

Here is Surat Sethi. When I moved from India at 12, it was a very new world for me. And as I slowly assimilated, I came to understand that it was important to understand other people's views, cultures, but yet also maintain your own. In today's environment, it's very important to make sure that you keep your identity. You don't have to always assimilate into everything, but that doesn't necessarily mean you have to disagree. It means that you can be your own person, have your own ideas.

Welcome back to Power Lounge. I'm Christina Parts Nebless. We want to get a check on some of the big electric vehicle stocks, which are firmly in negative territory today. That includes names like Rivian and Lucid as well as Chinese EV makers, X Peng and Neo. Tesla is down roughly 6% today, extending its weakness over the last few weeks, and months, of course. In fact, the electric giant is down almost 30%. 30% in May alone, which would be its worst month since going public in 2010. Kelly, back over to you. Watching that one, watching Twitter, wondering what Elon Musk's next move will be.

Christina thanks. Let's get to Bertha Coombs now for a CNBC news update. Bertha? Hey, Kelly. Georgia voters are going to the polls today in a major test of Donald Trump's political strength. He is strongly backing David Perdue in the state's Republican gubernatorial primary. That's because the incumbent, Brian Kemp, refused to join Trump's effort to overturn the 2020 presidential vote in that state.

In pre-election polls, however, Kemp has a strong lead. Hyundai is recalling 239,000 vehicles in the U.S. because the device that tightened seatbelts in a crash could explode instead. Three injuries have been reported so far. And as the high-profile Hollywood defamation trial enters its last week, Johnny Depp's motion to throw out Amber Heard's countersuit against him has been denied by the judge. Hurd's lawyers have arrested their case without calling Depp to testify. Back over to you, Tyler. Thank you very much.

Anna Head on Power Lunch. More on this market volatility. So was yesterday's climb merely a failed counterattack to this broader sell-off. And is there anywhere investors can find safety? We've got some ideas from Morgan Creek's Mark Yusco. That's next. All right, it's a 90-minute mark again. 90 minutes left in the trading day. We want to get you caught up on all the markets, the stocks, the bonds, the commodities, and more,

and where to hide amid the volatility. Let's begin with Bob Bizani, with stocks off the lows of the session. Hi, Bob. We are nicely off the lows, and it's mostly due to the consumer names that we've been seeing. There's been a modest bounce in mega-cap tech, but not dramatically so. I noted earlier on. Meta was among the biggest decliner to the S&P at the Open. Of course, that was related to the SNAP news.

Google's bouncing, alphabet bouncing a little bit, but big cap semiconductors still notably down on the day. They're off of their lows, but not dramatically. We talk a lot about peak travel, and when that's going to happen, we made a lot of jokes about Target saying luggage sales were up 50%. Well, again today, the travel and leisure names are down, and these have already moved down quite a bit in the last two or three weeks. The market's already seeming to believe that peak travel is already here. Royal Caribbean was $75, $76 just two or three weeks ago. So they were already down by a third, Las Vegas Sands Delta, and even Live Nation. I used to joke two months ago about how much ticket prices were for this summer for the rock concerts.

That stock also notably down in the last three weeks or so. The big strength today is the consumer names. That's what's been bringing us back off of the load. So we've got Coke and Procter & Gamble, Walmart and Merck doing very well. Walmart was 117, just a lot. a while ago, four days ago, and you can see it's now 124. So we're up 5% or 6% in the last four days. The biggest relief here, I think, though, is Johnson and Johnson. I remarked several times last week. I never saw a 6% drop in Johnson and Johnson in one day. That happened last week.

That's just one of the lowest beta stocks in existence. It just doesn't do that. And you can see here this nice bounce in Johnson and Johnson. It was 173, I think, on the close on Wednesday. And you can see here, Tyler Kelly, we're up, what, 10%. in just four days on Johnson and Johnson. There's one of the reasons the Dow's coming back. Back to you. All right, thank you very much, Bob Bazani. Now to the bond market where Treasury yields are lower.

Rick Santelli tracking the action. Rick, what's going on? Yeah, a lot lower, actually, Tyler. We're looking at short maturities like two-year-note yields. Well, look at the chart of a two-day. And you can see how we clearly really accelerated when we started trading under yesterday's low yields. And it was pretty much like that on the entire curve

as we took out some of the support from yesterday's low yield high prices. We're down over 14 and a half basis points on a two-year note, and if you open up the chart, we're on pace for the lowest yield close since the 18th of April. Let's call it five weeks. And if you look at a one month of tens, their yields are down as well, about 9 to 10 basis points, which means the curve has steepened, yes, steepened about five basis points. tens minus two is hovering around 28 basis points. And if you open that chart up to early April, you can see there's some pretty good support right around 20 basis points.

Many traders are leaning on that support going into that steepening trade, thinking that what we're seeing in the Treasury markets and what's echoed in Fed Funds, look at a December chart of Fed Fund futures, they're off 11 basis points, meaning they're 11 basis points higher in price. 22 basis points off their historic lows. That means less Fed. So the Fed can talk as aggressive as they want, and we're going to see the minutes tomorrow. But at the end of the day, it's Mr. Market that really seems to be setting the stage. And the stage isn't as aggressive as it has been

regarding Fed activity down the road. Tyler, back to you. Interesting conclusion there, Rick Centelli. Oil closing for the day, slightly lower. Pippa Stevens is at the CNBC Commodity Desk. Hey, Pippa. Hey, Taylor, muted move with the EU still trying to hammer out sanctions against Russian crude. European Commission President Ursula von der Leyen telling CNBC today at Davos that she hopes an agreement will be reached in the coming days.

But any deal requires approval from all member states. And Hungary is among those still opposing an embargo. Meantime, Wolf Research is saying Russian oil production has fallen, but exports have been surprisingly resilient with supplies rerouted to countries like India, that don't have sanctioned risks. The firm tracked this by looking at Suez Canal traffic, which is up 47% this month compared to last year. This is a more expensive route, though, which is inflationary to oil prices. The firm added these last resort trade patterns can portend bigger supply problems down the line. Let's check on prices. WTI is at 110, just about

flat on the session. Brent crude up half of 1% at 113192, and that gas up another 4 tenths of a percent and now approaching nine bucks, Tyler. Gas keeps moving up. Pippa, thank you, I guess. Turning back to the markets, our next guest continues to favor value overgrowth and is seeing some pockets of value in selected foreign markets. We'll get to that in a moment. Meantime, let's bring in Mark Ustco, Morgan Creek Capital Management, CEO and CIO.

Mark, welcome back. Good to see you again. As I understand it, you see two things over the next six to 12 months. One is somewhat lower inflation. You think parts of it are transitory. I'm going to ask you to elaborate. And two, a somewhat slower economy. How do those come together into an investing strategy?

Yeah. So, you know, we just saw the numbers the PIPPA was showing on oil and gas. You know, oil up over 100% in the last year. Gas, about 300%. Those are not durable increases. We're very unlikely. to see oil prices double again in the next year. 75% of the CPI increase over the past year

is oil prices and used car prices. The chip shortage is starting to show some signs of ameliorating. So my guess is that inflation numbers will trend down lower. The pundits have it down sub 2% by the middle of 2023. And I think this will be a distant memory. I think what we really have to worry about is I would actually take the somewhat out of your your comment. I think we are going to see dramatically decreased economic activity globally.

I think there's going to be a crash in economic activity. If you've seen the picture of the ships anchored off the ports in China, they can't get in to unload, they can't get back reloaded to bring stuff back here. Supply chains are going to get worse. You've heard people all over Davos talking about it. I think that we're on the verge of a really difficult period. And I don't want to be too alarmist, but you look at 90-year cycles, Tyler, 1840s. We had super high leverage.

We had too much speculation. And then we had a depression. Then in the 1930s, we had too much debt, too much speculation, and we had it. So here we are 90 years later, and that cycle is really tough. So if we don't make some really smart policy decisions, I do get pretty nervous. You think, let me drill a little bit on the China question. If China reopens, does that scenario of depression go away? Or would the return of Chinese capacity into the economic system take so long that it really

wouldn't make all that much difference? No, a really insightful question. I do think that the sooner they unlock themselves, the better. But it is going to take a while to your point for those supply chain constrictions to get fixed. It takes a while for ships to cross the ocean to come back into port, get reloaded. So I do think there is going to be a lag effect. You know, the way things are playing out, it reminds me so much of 2001. You know, if you remember 2000 peak of the tech bubble, all these dot coms started to collapse,

but it really wasn't that bad a year. The market was only off 6%. It was really in 2001 where the down draft started. We had the first quarter negative GDP just like this year. Second quarter, we had a little rebound, but then third quarter with 9-11, we had another down quarter and we had a recession. But then the problem was we had all the frauds, the end. the world comms and all the restatements of the so-called earnings from the dot-com bubble. And the market was really bad in 2002.

So I see signs of that today. Right. We had just excessive valuations, too much debt. And to your point earlier, where do you hide? Well, you hide in the staples. You hide in companies that have this novel concept, Tyler, called profits. You know, gone are the days where we're going to pay 10 and 20 times revenues for companies that don't make money. I think that's over forever. I don't know if you've addressed it already,

Mark, but are you still looking to crypto as, you know, Bitcoin specifically as something with major upside? Yeah, look, Bitcoin in particular, Kelly, you're exactly right, is the base layer of the internet of value. We think this is a time to accumulate. You know, the difference between Bitcoin and tech stocks is tech stocks started from egregiously, overvalued levels, and now they're only mildly overvalued. Bitcoin today is the cheapest it's been except for 6% of the time. It's been higher priced 94% of the time in its history relative to its long-term trend. So it's actually on sale. And I like to joke that investing is the only business. When things go on sale, everybody runs out of the store. So we are definitely accumulators

of Bitcoin at these prices. And we think it's a highly diversifying asset for your portfolio. It was 0% correlated to bonds, only 0.15 correlated to stocks. And you shouldn't put all your money there, but a good 2, 3, 4, 5% can add a lot of value to a portfolio over the long term. Although it has been highly correlated to the NASDAQ this year and the valuation is predicated on are using a stock to flow measure? No, in fact, great point, Kelly. In deal with a deal deliquifications or in margin call events, basically you don't get to sell what you want to sell. You sell what you have to sell. So if you go back to March 2020, gold, bonds, Bitcoin, all got crushed when stocks went down.

Same thing here. Stocks go down. People get a margin call. They can't sell the stocks because they're already down. So what do they do? They sell bonds. They sell Bitcoin. They sell gold.

All three of those assets now are falling much less in the past couple of weeks. and tech is starting to fall faster. So we think that decoupling and that diversification benefit is going to really show its strength here in the coming months. All right. Mark Yusko, thank you so much for your time today. We appreciate it. Thanks, Kelly. Thanks, Tyler. Appreciate it. You bet. Let's get more on this market volatility with tech leading the declines like Mark was just saying. The NASDAQ off its highs by more than 30 percent. Now those in the November highs will have the technical take on where we go next. Plus financials down today, SVB signature, Discover, synchrony, all lower.

Financials. Having a strong session yesterday, but not able to hold those gains. We're back in a moment. Welcome back to Power Lunch, everybody. Whipsaw Day for the markets with the average is well-off session lows, but still down across the board. Our next guest is reading the charts, and she says Apple is near a bottom,

and maybe we're seeing capitulation for the NASDAQ. Let's bring in Jessica Inskip, director of product at Options Play. Jessica, welcome. Let's start with Apple. Everybody's watching it. What do you see? Yeah, Apple makes up such a huge piece of the market.

So I think it's really important to chart it, whether you're bullish or bearish, just understanding it has a huge component of the market. It looks like it's forming consolidation around its resistance levels, so it's our new support. I need confirmation in order to consider that a buy. However, going back just to the Dow theory and the basics of technical analysis,

this is a good indication that it's forming, consolidation and perhaps this is a bottom for Apple and perhaps a good time to buy. But I need to see that validated. This is just step number one in that validation process of determining if we hit a bottom for that security specifically. 139 or so is where we are. By validation, you mean basically need to start moving higher. How much higher for how many days typically? Yeah. So I need to see it move a little bit higher, but I also need to see it not go below that support level. I need to validate that back support, that that is an area of supply pushing Apple back. So the sellers are gone and there's just buyers at that level. So really I'm looking for more validation of that support line

at 139. And similarly, do you see the same kind of setup happening across the NASDAQ? So I'm hoping so. So I actually took a look at X and D, which is the NASDAQ, and compared it to Vol Q, which is the volatility index that tracks the NASDAQ 100. And so something when you're looking at the broad-based markets or technical analysis in general, and we're looking for manipulation, is we're looking for that high spike in volatility, which is normally easier to see in hindsight. But with X&D, what I've noticed is that volatility hit a new high. I believe that date was May 12th, but the underlying X&D made a new low, May 20th, but volatility did not spike with it, which is a sign that perhaps capitulation happened.

within that specific narrow-based top 100 tech views in the NASDAG. Another stock you wanted to draw our attention to was General Mills. Is that right? General Mills. Yeah. General Mills is definitely a safe bet. It's something that has a really great chart. They have a relatively low PE for the last 24 months, and they're raising their dividend yield I recently just read. So it's good from a technical perspective. And fundamentally, it seems rather healthy and something that would be suitable. in this type of macro environment. So partially contrarian, but looks like a solid buy, just because everything is lining up.

Thanks very much, Jessica. We appreciate it. Yes, thank you. Have a great day. Yeah, you too. All right, for more on today's tech trade and how to find opportunity amid the volatility, tune into a CNBC special Trading Tech with John Ford.

That's tonight at 6 Eastern right after Fast Money. Tonight at 6 p.m. up next. Consistency is. key in today's three stock lunch. We're going to trade three names that have been raising their dividend payouts year after year. And they're all higher today. Our lunch will be right back. But these stocks are not all created equal. Welcome back amid the volatility. Investors are looking for stocks that pay them back in the form of consistent dividends and dividends that keep up with inflation. So we ran a screen of names that have raised their payout year after year. And we find

Coca-Cola, IBM, and Exxon Mobile. Let's bring in Chris Zach. Karelli Chief Investment Officer with Independent Advisor Alliance. Chris, kind of get your picks for each one of these names here. Welcome. And let's kick things off with Coke. All right. That sounds great. Well, Coca-Cola is a great company. It's an iconic brand. They have over 40% market share in the U.S. 20% market share globally. So they have room. They're a market leader, but they have room to grow. And they're diversified, too. They have obviously colas and soft drinks, but they also sell energy drinks, bottled water, and juices. So they're a great company, well diversified. It's a little bit of expensive stock. The P's around 25.6. So that's my one misgiving. But if you have a three to five

year time horizon, I think this is a great stock to own. It's got a 2.8% dividend yield. And so just as you mentioned, you can get paid while you wait. And it does screen well. I agree with that. The next name is IBM. And as you go through these, implicit in your endorsement, if you are endorsing all of them, is, is it your sense that there's no danger that these companies will have to halt their dividends or their dividend increases, I should say? No, that's a great question. And I think, you know, these three companies are really strong companies. They've got a very long track record, whether it's, you know, 59 years for Coca-Cola or, you know, over 30. for each of the other two companies of raising their dividends. So I don't think any of these three companies are in danger of having their dividends cut. But if you look at both dividends and price appreciation, moving on to the next name, IBM, that's one that I'd be a little bit more concerned about. I think it's got a high dividend yield, 4.9%. That's probably the best thing about it.

But it's a company that's really struggled to adapt to the cloud, looking at Microsoft, Apple, and some of its competitors, they've done a lot better and you've seen it in their stock price. So IBM is one that I'd be a little bit more concerned about in terms of having price appreciation. And so despite the fact that it has a great dividend yield, and I think it might be up today, if I saw that correctly before going on air, this isn't one that I would chase. It's a shrinking company. I mean, if you look at it, just strictly speaking, in terms of revenue, it's been shrinking. Let's look at one called Exxon. You used to be a big part of the Dow.

It used to be a big oil company. I think sort of it still is. Yeah, one of the biggest, right? huge oil company, oil and natural gas, very well positioned for this environment. You know, unfortunately, we're in a higher inflationary environment. We're having the war in Ukraine, which is making things only worse from that point of view. And so that's an unfortunate situation that we find ourselves in. However, ExxonMobil is really well positioned both to grow its dividend and grow its earnings.

It should probably have some price appreciation. And of the three stocks, it's probably the one that has the most upside over the next 12 months. you know, looking at ExxonMobil, you know, one of the things that's great about it is for those people who don't have any inflation hedges in their portfolio, this is something that you could add that can give you some inflation over the next couple years as the Fed tries to fight inflation and it's going to take them some time to bring things back down. All right. That sounds great. Chris Sackerelli, thank you very much. Appreciate it. Thank you. We've got more on the market volatility and some bright spots when power lunch returns. We'll take a look at some of them after this. Oh, it's dangerous to hand me the Telestrator. You don't know what I might write here. But right now, watch this, folks.

I'm going to show you that the Dow Industrials, there are 175 points lower right now. They have come back. They almost were positive a few minutes ago, but now swooning just a little bit. Hang on. You never know what's going to happen in the next hour. A lot of technology stocks, a lot of the ad-supported tech stocks following that report earlier this morning. It's companies like meta, Google, or alphabet, even Amazon, which has a lot of ad-supported technology in it following Slack. Absolutely. And just to mention the NASDAQ, the worst performer today, that's even with sliding rates.

So it's shown that no matter if rates are up or down in the session, it can be under significant pressure. Let's look at Zoom, shall we, because it's one of the bright spots today. This, a darling a year or two ago, obviously not a darling anymore. But today, the year today, you see it's down 50%. But today, a higher by 4.86%. We should mention the company has managed to beat on the top and bottom lines in pretty much every report since going public, even though the shares are down. And we've got a lot of top performers in auto parts today. O'Reilly Auto, O'Reilly.

There it is, up almost 5% AutoZone, up $82. I looked at that number. That sort of messed me up. But that's a 4% move on AutoZone. zone. We spoke to advance auto parts. That stock a little lower, but much better performance here than we're seeing in the housing stocks. And the consumer staples are coming nicely forward there. Some of the ones we talked about, Kellogg. We just heard about General Mills, Campbellsoup, Hershey. There's General Mills up 1%. This was fun. Watch out Tony Romo.

Hi. Thanks for watching, Power Lund.