Power Lunch - Stocks Bounce Back, and A Plan To Ban? 3/23/23

Episode Date: March 23, 2023

Stocks are bouncing back today, following yesterday’s post-Powell selloff. We’ll get to the bottom of what’s moving markets, and explore where we could head next.Plus, TikTok’s CEO is testifying on Capitol Hill, as calls for a ban of the platform grow louder. We’ll cover all the angles, and speak to a TikTok creator about the impact of a potential ban. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Powell lunch alongside Contessa Brewer. Welcome back. Thank you. I'm Tyler Matheson. Coming up, stocks bouncing back today after yesterday's post-Powl sell-off. We will get to the bottom of what's moving the markets and look at where stocks and rates could be headed next. Plus, the debate over TikTok Congress calls the CEO on the carpet, calls for a band grow louder. Set aside the impact here on TikTok and Snapchat meta. What about all of those entrepreneurs who use TikTok to reach customers? We'll talk to a creator about the impact of a potential ban. First, let's check out on the market.

Stocks are higher right now with a strong performance for tech. There you're seeing at the Dow up half a percent, S&P up three quarters of a percent, and the NASDAQ, off the highs of the session, but up one and a third percent, Tyler. And for more on the day's movers, let's bring in Dominic Chu and Christina Parts in Hevelas. Dom, kick us off, please. All right, so here we're talking all about the momentum that we've seen in the marketplace, really gets sapped over the course of the last probably two to three hours. Mention where we are in stocks off the session highs. Now, if to kind of give you some context,

remember, we lost 66 points on the S&P 500 yesterday at, you know, at the close. If you look today, shortly after 11 a.m. Eastern time, we were up 70 points in the S&P 500. We had gotten back everything we lost and more yesterday. And now we've seen that deterioration happen. You can see right now only up about 30 some points, giving back half the gains we've seen today. One of the reasons why is that bank trade that looked so stable earlier on this morning has now lost a lot of steam itself. Check out some of the regionals, the most embattled ones in the western United States. We're talking about, of course, First Republic Bank, higher at one point today, now lower. Look at Pack West, Western Alliance. Even Schwab is lower on the day as well.

You can see by the charts we've seen a real deterioration in some of those regional bank stocks over the course of this trading day. And then one bright spot that we are seeing, one of the best performers in the S&P 500, Accenture, IT services and consulting. That stock is up about 7% today, better than expected earnings report, generally speaking, but it trimmed its annual forecast. So why is the stock up? One reason? Because they've announced job cuts. Sadly enough, 19,000 jobs will be cut. That's roughly 2.5% of their workforce. So Contessa, you've got the cost-cutting measures in place. Also, if you look at Accenture, the commentary is businesses are starting to spend less on those tech services. I'll send things back over here.

Yeah, definitely tough on employees, but investors do like to see that focus on cost efficiency. Dom, thank you. Two big names in FinTech heading sharply lower today. Let's get right to Christina Pertzenevless in San Francisco for that story. Hi, Christina. Hi, well, let's talk about crypto exchange coin base. The shares are plunging right now in a possible SEC legal action over securities law. The SEC argues that certain crypto assets and staking, which is just a way for users to earn rewards by lending tokens should be treated as a security and therefore regulated like a security.

Earlier this morning, I was able to interview the chief legal officer from Coinbase who disagrees with the SEC, saying the commission has not responded to CoinBest's request for clear security definitions and that they welcome a legal process. You can see shares are down 14% today and we're actually seeing a rare divergence

in between Bitcoin as well as Coinbase because Bitcoin is actually up about 3%. normally would be trending lower. Shares of payments firm Block continuing to plunge after a scathing report from shortseller Hindenburg. Block responding moments ago saying they will not be distracted by shortseller tactics. You can see Block down 14.5%. All right, Christina, thank you very much. Christina parts of nevelas. Switching gears now. Let's talk bonds for a little bit. U.S. Treasury's moving lower as investors digest the Fed's decision to raise rates at this week's meeting. Our next guest says he expects the Fed funds rate to come down sooner and faster than the FOMC suggested in its announcement.

He also thinks that both U.S. 10-year and two-year bonds are buys under the current circumstances. Let's bring in Kamal Sri Kumar, President of Sri Kumar Global Strategies. Welcome. Good to have you back with us. What did you hear that the market doesn't seem to be hearing or what is your intuition that tells you that the Fed Fund rate is going to lower sooner. Good to be with you, Tyler. In terms of my expectation for the interest rates moving down, there are three major factors.

One is, if you look at what has happened yesterday from before the Powell's press conference, and then going on to the conflicting statements that were made by Chairman Powell and the Secretary Yellen at different conferences, come over to today. What has happened? the entire yield curve has shifted downward. Two year, 10, year, 30 year, they've all moved down. And I think the downward shift of the yield curve is going to continue. That in turn means that irrespective of where you are on the yield curve in terms of your investment,

you're going to get a capital gain if you wait long enough. Second, I think we are heading toward a recession. And the recession seems even more likely after the recent developments on the interest rate policy and what I call the total mismanagement of monetary expansion during 2021, early 2022, when the balance sheet was doubled, even as zero interest rates were kept despite an economic recovery. So that is also going to cause a recession, going to bring yields down. And third, you have a banking crisis. Surprise, surprise.

With this kind of economic management, why would there be a crisis? And there is, and the banking crisis is inherently disinflationary. That's a third major reason, Tyler, I look for lower yields and more gains in the fixed income market. There are some people, I think, who would say that the banking crisis is inflationary, not disinflationary. because there have had to be sort of credit backstops put in place, liquidity sent into the system. How do you answer that? That's a great point.

Yes, liquidity is going to be injected into the system. The question is that is the inflow of liquidity, and how does that compete with the fall-off in aggregate demand that is coming on the other side, banks are going to be unwilling to lend. and Dom talked to us just a few minutes ago on your program, Tyler, talking about how regional bank stocks are again taking a hit. So if you are a small, medium-sized company depending on that bank for a loan to be extended to you,

you're going to be disappointed. And that is disinflationary irrespective of the backstop that the Fed and Treasury are providing. The credit tightening, the unwillingness, I maybe it's too strong a word, to make fresh loans is going to be disinflationary. Contessa? That is very, that's very well put, yes. Okay, so right now you think the two year and the 10 year are buys, according to the note.

And, Shri, I went back through your column over the weekend before the Fed hiked rates by another quarter percent. It's very clear that from your perspective, you're skeptical of the Fed's ability to navigate quantitative tightening amid the banking crisis, amid the inflation and whether that can come down enough, all while avoiding a serious recession. So if that's the case, and yet we're seeing yields on the two-year and 10-year, can you put those back up for a minute? We're down around 3.44 on the 10-year today, the two-year down to 3.88. I mean, at the beginning of March, the 10-year was above 4%. You had March for the two-year early in

March on March 8th, above 5%. At what point do you think that these, treasuries are no longer a buy? That's a great question. In terms, and again, thank you for reading my write-up carefully, Contessa. I would say to you that in terms of having a credit event, which is what we are experiencing, I have written repeatedly over the last eight to ten months, we are going to have a credit event, and that will cause the Fed to switch policy. And that's exactly what is happening.

And in terms of the developments in the last couple of days, the Fed's situation and the fact that they are in a corner is leading to the yield coming down. And I don't think that is going to change anytime soon, Contessa. All right. Shri Kumar. Thank you. Appreciate that. Thank you very much. Coming up, Fintech in focus as Coinbase and Block both sync today.

Block falling on a short seller's report. We dig into the claims. Tech Check is. next. And then TikTok locked. The app tries to avoid a ban in the U.S. The CEO trying to convince Congress. Meanwhile, creators have their livelihoods at stake. We'll hit all of the angles of this big story. 12 minutes past the hour time for today's tech check block responding to the shortseller report that is taking down that stock today. Let's get to Deirdre Bosa out west. Hi, Deirdre. So Contessa, that short seller would be Hindenberg researcher. It was behind Nicola and Adani's

fall, Block just responding, and going pretty hard, actually, quote, we intend to work with the SEC and explored legal action against Hindenberg research for the factually inaccurate and misleading report they shared about our cash app business today. Hindenberg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declining stock price. Let me give you some context here. Hindenberg narrows in on the cash app and take a look at this chart because Block really became a Wall Street darling due to the success of that cash. app. Meanwhile, you have PayPal's Venmo. It actually pioneered this new simpler interface for peer-to-peer or P-to-P payments. Squares cash app, though, it seemed to come out of nowhere,

climbing the app store charts. It had better profitability, and it had this cool factor that became a kind of phenomenon in hip-hop culture. Hindenberg, though, says that Block won those advantages through flawed and murky means. Founder and CEO Jack Dorsey often talks about his mission to serve the under and the unbanked. Hindenberg says, yes, They did embrace that, but a specific segment of it, and he says criminals. Now, Dorsey in the past has often pointed to how hip-hop artists rap about using cash app. Hindenberg points out that these songs often talk about how they use it in scams to traffic drugs, even pay for murder. Now, the short seller also knocks that profitability that made cash app more appealing to investors than Venmo, for example.

Hindenberg says that it fueled that profitability by avoiding a key banking regulation meant to, merchants and points to accelerating losses at afterpay, which was Block's giant $29 billion acquisition, which guys, I had to check that number like five times because it just, it happened at the peak. It feels like so much money for a fintech company these days. Well, Deirdre, do some of these same issues potentially plague some of the cash apps or blocks competitors? Like a Venmo? Well, that's the key. Venmo hasn't been as profitable. They haven't been able to really capitalize in the same way. And that's why you've sort of seen block pull ahead and cash app sort of enter the lexicon.

Venmo still is very much the verb and it's widely used and its total payment volume is so much more than that of the cash app, but just hasn't been able to get those profits in place, same kind of profitability. And maybe this is why. In the reporting you just gave, there were a lot of allegations of criminality, of the of the app being used to finance murder and all kinds of things. Are there specifics in this report? I mean, it is largely anecdotal,

and that's what the street is taking notice of as well, is that, yeah, they even made a compilation of music videos, rappers using cash app and talking about it for things that are illegal, but is there actual evidence to point to that? Not that we know of yet, and that goes to what Square Block is saying now, is that they're going to prove this wrong and that there's no merit to these allegations.

And that's also why this, stock has maybe come back. It was down as much as 20%, but a lot of the notes out from the street are saying, you know, this doesn't really change it. These are concerns, but we don't know how many transactions violate these sort of know-your-customer or fraud rules. All right, Deirdre, thank you very much. Deirdre Bosa reporting from San Francisco. News alert now on Walmart. Pippa Stevens has the details. Hi, Pippa. Tyler, well, Walmart is cutting hundreds of workers at e-commerce fulfillment centers across the country. In a statement, the company said that this is to quote,

prepare for the future needs of customers, those layoffs will be focused at five fulfillment centers across the country. And it comes as Walmart anticipates slower sales growth and lower profits in the coming year. Walmart, of course, not the only one cutting costs. Amazon earlier this week slash 9,000 jobs. Stock up about 1% right now, guys? All right. Thanks very much. Pippa Stevens reporting there. Ahead on our program detailing Ford's EV roadmap, the company's CFO offering guidance and targets for its business shift. Plus, yelling over the crowd.

The market might think the government will step in to help any and all failing banks, but Secretary Yellen may have a different message. Power Lunch will be right back and bring that message to you. All right, welcome back, everybody, to Power Lunch. Stocks are still higher right now, but the Dow, especially losing a lot of its early gains,

now higher by 141. It was up more than 400 at one point earlier today. Bob Bazani has been covering. the action for us at the New York Stock Exchange. Bob. Tyler, the good news is tech is still holding up and leading the charge. The bad news is banks are again losing steam, and a lot of them are back where they were two weeks ago. Let me show you the Dow industrials here.

We were up earlier a little bit more. United Health is a little bit on the weak side. JP Morgan is flattish right now, but I just want to show you big tech rallying. Look at these numbers here. Again, big moves here, Nvidia, Microsoft, Intel, all up rather dramatically. over the last month here. Taiwan semiconductors are up 10% so far this month. The important thing is all the hopes for lower rates is what's moving these stocks. So that's good news. Now here's this difficult news. Office reits, terrible performances, new lows right across the board for some

of the big names. Vernado, S.L. Green, brandy wine, a lot of the big apartment reits that we've seen. Equity Residential, all 50-week lows, not just concerns about apartments, but even offices, but even apartment reits are doing very poorly. So that's a big important group, but it's the banks that have no stability at all. We were hoping for a little bit of a bounce today, but Comerica, that's a new 52-week low for Comerica at $40 or so. Zion's Key Corp, fifth-third, not only are they not rallying, they are essentially back to the lows where they were about two weeks ago when we had the first signs of this. So I just want to show you where we are on the month for these big names. Most of them are down 35 to 40 percent, and again, no bounds at all.

We are essentially close to 52-week lows on all of these names. That's the big concern. And, of course, we've got, you know, Contessa, a Fed lending facility to help these banks out to post assets if they need to at 100 percent of the value. And yet people still don't seem to believe there's an end to this story. There's so much fear and loathing where this is concerned. Masterful job, by the way, managing equities action and microphone adjustment, all of it. at one time. Thank you for that, Bob. Let's get to the bond market now. Rick Santelli standing by in Chicago. Rick. Thanks, Contessa. You know, yesterday's Fed meeting had so many moving parts.

We had Janet Yellen going in one direction after the market somewhat appreciated what the Fed had done in terms of could be the last hike. But if you look at a two-day of two-year and tenure on top of each other, one thing should dramatically jump out is that two years are now winning the race keeping up with tens, which means the curve is less inverted. And if you look at a chart going back to September, you could clearly see that they are now very close to a very similar formation. We hover near the lowest yields on a closing basis since September. And what that has done, as two years have led the race down in yields, it has made the three-month-to-ten year spread near the most inverted back into the 80s, the true recession spread. It's four basis

points away. Minus 125, minus 129 is the bogey from January. And if you look at what's going on overseas, boon yields and 10-year U.S. yields are getting closer together. As you see on this chart, they're near the closest they've been going all the way back to mid-2020. And this is very key, especially considering our Fed led the way. And finally, if you zoom, you can see that even Even though boon yields are getting closer and closer together, another few basis points, and they'd be the closest together going all the way back to 2014. Tyler, back to you. Rick Centelli, thank you very much.

Oil trading closing for the day, slightly higher, right around $71 a barrel. Pippa Stevens is here with more in the energy trade. Hey, Pippa. Hey, well, it was a vault all day, and we did see oil take a leg lower into the close here, but still around that $70 per barrel level. And the street, of course, still digesting Chair Powell's comments and what that means for oil demand going forward. Now, earlier, we did have a drop in the dollar supporting prices,

but on the flip side, we did have another inventory build yesterday, a surprise inventory bill, so that does remain a challenge for the market. Now, Jeff Curry at Goldman Sachs said today that, you know, this financial contagion has not yet moved into the physical market. And so despite that big 10% drop we saw last week, nothing has actually changed on the fundamental side. The supply demand is still the same as it was before the banking fallout. So he is a little bit more optimistic than others on the market.

price direction. Now, energy stocks are also following oil lower, but two names I did want to point out today, Pioneer Natural Resources and Marathon Oil, and that's because both names were upgraded to buy over at City in this kind of uncertain environment, they said to really focus on companies that have catalysts. And so for Pioneer, that's better well productivity in the second half. For Marathon Oil, that's international gas exposure. So two names to have on the radar. Solar stocks going in the other direction, heading higher today. Yeah, so they're catching a bid this week, but last week was the worst week of the year for them. So it's definitely partially a relief rally, but a couple of other things going on here.

One is that Mosaic solar is going to the ABS market with a group of solar loans. And so that means that appetite might not have dried up completely. And that was a key hurdle. Also, one more name, Enphase, getting two upgrades this week. All right, Pippa. Thank you. Pippa's demons. Let's get to Simamodi now. CNBC News Update. Hey, Tyler, here's what's happening at this hour.

A far-right extremist was sentenced today to three-year. in prison for storming the Capitol and directing a large group of rioters to the office of the House Speaker, the then House Speaker Nancy Pelosi. As she announced her decision, the federal judge in the case called the actions of Riley Williams utterly reprehensible. In Houston, a suspect accused of holding hostages for several days in a motel was shot and killed by FBI agents during a rescue operation. All the hostages are safe and there were no agents injured. And in Tel Aviv, police using water cannons as thousands of protesters blocked a main road in the city

with some members of the military joining ongoing demonstrations against Benjamin Netanyahu's plan to weaken the judiciary. Local media reports say the country's defense minister now wants the prime minister to drop his proposal. We're watching to see if he does so. Tyler and Contessa. Thank you for that.

Still to come, we're monitoring Capitol Hill where the TikTok CEO testifying before Congress, a potential ban would have implications far beyond Washington and Wall Street. We'll talk to a TikTok creator about what's at stake. Power Lunch. We'll be right back. Welcome back to Power Lunch, the CEO of TikTok testifying before Congress today,

facing tough questions for members of both parties. The company is fighting to avoid a nationwide ban here in the United States. Julia Borsden has the latest for us. Julian, what did you hear? Well, Contests, TikTok CEO showed you facing intense frustration and criticism from both sides of the aisle. That criticism sending shares soaring of meta, snap, Google, though Pinterest is down just fractionally now, was I or earlier. That's because those companies are competing with TikTok for both ad dollars and eyeballs

and would benefit if it is limited or shut down. Now, TikTok CEO addressing concerns about the app spreading dangerous content and even causing death to representatives showing videos during the hearing, one showing a gun and threatening violence against the committee share, saying that that video was left up for 40 days, another video encouraging suicide. But it was questions about the privacy of U.S. user data and whether it's protected from the Chinese government and also questions about Chinese government manipulation on the app that were front and center in this hearing. Chu acknowledging that old U.S. user data is not yet secure, only when the company completes its data storage project in the works with Oracle, that only then will the Chinese-based employees not be able to access old U.S. user data.

And he said that is set to happen later this year. Tyler. Julia, stay with us as we bring in Ed Lee, New York Times reporter and a CNBC contributor. Ed, I don't mean to be cynical here, but do the merits of the case at this point really matter? In other words, is what really matters here, the politics of the case, the people on both sides of the aisle saying, I'm tough on China, no, I'm tough on China, and here's how I'm going to take it out on this company. Tyler, I think your cynicism is actually well-founded. Yeah, it's really all about the politics.

I mean, these hearings in general have always been a moment for these guys to grandstand, but this kind of bipartisanship, actually, on display was astounding. Also, just it was brutal, really, if you looked at it carefully, or you didn't have to look carefully to see how brutal it was. He was taking the brunt. TikTok essentially taking the brunt for two things here, right? Sort of the pervasive problems of technology altogether, as well as the challenges coming from.

China, right? So I think they just sort of unleashed all of their anger and frustration around these issues in this one hearing against this one man and this one company. So yeah, I think I think politics is really what's the biggest factor here. In terms of the facts, in terms of, you know, whether data is actually being shared or used or manipulated in some way, we don't know, right? So I think that's the, that's what Congress and that's what ultimately the Biden administration will be looking for is the potential for this harm versus the actual harm as they did in Huawei. The Huawei deal, you know, the Huawei sort of ban essentially was founded on that idea as well. Is that like we don't really know exactly what or if that they're doing with this equipment,

but that they could is the issue. You know, two things strike me about the political risks to this. One, if you were to ban a certain type of car or golf, you would have your constituents outraged. 150 million people using TikTok, Julia, are the lawmakers unafraid of the political back? last year because much of that audience is too young to vote or they just don't. And two, when you look at Facebook and Twitter, we know that those platforms were used by bots to influence Americans' behavior in the 2020 election. So why aren't they under the same amount of scrutiny? Well, there are a lot of questions packed in there, Contessa, but I do think that there was a notable

push to reform Section 230 in this testimony. today and in this hearing in the sense that there has to be some sense of these platforms being held accountable. And what Section 230 does is it means that the platforms are not liable for the content that's shared on their platform. If there were to be Section 230 reform, that would be challenging for meta, Twitter, and SNAP, but primarily meta and Twitter more than the others. And so that would be challenging there too. So there's no question that more reform of some of these laws could be challenging for the other tech companies. But the, The real focus of the hearing today was on China.

Question after question after question about how much the Chinese government controls, whether the Chinese Communist Party has influence, whether TikTok is a Chinese-owned company, so many questions really centering on China contests. And I think that's what really differentiates this debate from that which I heard when I was reporting on all the times that Mark Zuckerberg was testifying about the questions of manipulation on his platform. So I think that's why it's really being treated differently this time around. So, Ed, I was sort of stunned to hear what Julia reported, and that is that, quote, older data is not yet quarantined.

This all awaits kind of a process involving Oracle that won't be done until later this year. I mean, that would certainly add fuel to the fires of those who would like to ban TikTok, wouldn't it? No, it absolutely would. And, you know, sort of decoupling this data. you would have thought, actually, I would have thought that it would have happened a while ago. So, yeah, I think, you know, the reporting there is actually, you know, is important to point out. I mean, Beijing also didn't do TikTok any favors by essentially releasing a statement right before the hearing saying we won't allow any sale, any divesture of TikTok. I mean, you know, the questions around the hearing were, well, how much does China really control the company?

Well, clearly a lot if they're issuing that statement, making that presumption. So what's the next step, Julia? Well, I think this is a baton that's being passed back and forth between the executive branch, Sipheus, and now Congress. And I think one reason we haven't seen more decisive action yet is in part because of what you mentioned, who wants to be responsible for shutting down an app with 150 million U.S. users. But it does seem like there's going to be this congressional push. And we're also waiting to see what Sipheus calls for here. So I think it's going to be sort of a full court press to push for change in the way TikTok.

is managed, but one thing I just think is really important to stress here is there is the question of whether or not there should be a full out ban of TikTok. That should be shut down. But the more complex conversation is what if TikTok is forced or there is a forced sale of the U.S. assets of TikTok? Then there are all these questions of what does that include? What does that entail? Does it include the algorithm which ByteDance does not want to be selling or spinning off? And that's part of the conversation as well. And this this really complex issue of whether a forced sale of TikTok could actually amount to a ban of TikTok or something closer to a ban or just really limiting its potential if you force a sale. Julia, if you'll stick around for another minute, Ed, thank you for weighing

in on this conversation. What really is the heart of the matter for people who use TikTok is that it can be a big moneymaker. And we saw a crowd of TikTok creators gathered in Washington yesterday. They're protesting a potential ban because they say the platform provides their livelihood. Grace Williams is a TikTok creator and CEO of Slimes by Grace. So her business becomes sales, brand partnerships, reviews of toys and food, and then the sales of slime. And Grace, I understand 80% of your income comes through TikTok. Could you move all of that to another social media platform? So I think it's extremely hard to, at the level I'm at now on TikTok to then just change to a different platform.

Most creators do use all different platforms just in case of something like this does happen, but most creators do heavily rely on one platform. And TikTok is that for me 100%. So from going to $2 million on TikTok to then going to my other platforms, which don't have nearly as many followers as that, it's definitely a big difference. So what's your concern when you're watching the CEO of TikTok testify on Capitol Hill? What's top of mind for you? So top of mind for me is like what to do next, what the next steps?

are because I so heavily do rely on TikTok. I sell most of my slime on TikTok going on TikTok live, being able to show my products and just chatting with everybody. So that's like the number one concern is like when is this going to happen? How much time am I going to have? Because it takes a long time to be able to take that platform that I have and that community that I have and move it to a different platform. And the other platforms do have completely different algorithms like YouTube is long form content

and I don't specialize that at all. So it's going to be a big, big change. Julia. Grace, I'm curious whether or not you see opportunity in the Instagram Reels format. I know that most TikTok creators also cross-post their videos on Reels. And I know that Meta, Instagram's owner, is really making a big push to try to bring creators like you over to the platform. And also to make it easy for you to sell products via their platform. This is something that YouTube is working on as well.

They also have a short form format. Do you see opportunity in both of those platforms right now, both YouTube and Instagram? Instagram Reels? So I do because they are very fast growing and they definitely want to have a bunch of creators come over to it. So they are giving like very good incentives to be able to do. And I know they just did like one program called the bonuses where they actually pay you for those short form videos.

But it is very, very hard because I'm so focused on TikTok. I believe like Instagram and YouTube, they don't really favor if your content is coming from TikTok. So I'll save my videos from TikTok and repost them onto the other platforms because it's so hard to be able to really focus on filming for three different platforms and for those algorithms. So I definitely have been repurposing all of my content onto those platforms, but because it's not my main one, you know, like Instagram would want you to film in-app, be able to edit in-app, and everybody all over TikTok is saying to follow those mandates to be able to really push onto

those Instagram reels. So it's definitely going to be a big change. I would have to kind of focus on both either TikTok and Instagram and YouTube and be able to. to film like film the same one video but on those three different platforms to be able to organically have that algorithm pick it up and really push it i really like all the slime behind you there grace it's cool man i really love it what my question is this what is it that makes tictock so so much your sort of lead platform and what makes it so compelling to your customers that that's where everybody seems to gravitate what is it about ticot that makes it so so so i'm I think because TikTok is like the hype of the social media app now, Instagram has been around forever, YouTube has been around forever.

So it's kind of like people really saw this TikTok and we're like, whoa, this is awesome. And at the beginning of TikTok, people would completely blow up overnight from having zero followers to like millions of followers, literally for the week. So it's really crazy on how fast you can grow on TikTok. But I think what's just so great is it really, TikTok really focuses on being able to communicate and really be able to have that kind of personal interaction. I feel like on Instagram and on YouTube, it's a little bit more like professional or a little bit more like showing the good parts of your life or the good parts of the business,

whereas TikTok is a lot more like personable. I guess it's like socially acceptable to be able to go on and show all the hardships of a business or show all the hardships of just day-to-day life that people share. So I think it's really more personable and you feel like you're kind of talking to your friends rather on Instagram.

It's kind of more of like a show, I guess. Yeah. You know, I love your slime and I love anybody who can say, that Facebook and Instagram have been around forever. That is a wonderful... I would love to trade places with you. All right. So thank you very much, Grace.

We appreciate it. Of course. Thank you so much. You too. All right. Great. Take a look at the Dow right now. It's been around almost forever.

Barely higher right now. Briefly turning negative. It had been up 480 points at the high. Coming up a better look at Ford's EV roadmap. But first we had to break throughout the month of March. We celebrate women's heritage, sharing stories of the women leaders in business and those of our CNBC teammates and contributors. Here is CNBC, senior health and science reporter Meg Turrell. Women are underrepresented at the top of science and medicine, whether it's running pharmaceutical companies or research divisions or winning Nobel Prizes.

But that's starting to change. And women are doing amazing things in these fields, from winning the race for COVID vaccines to pioneering the science that's letting us. program DNA. I'm inspired watching what these women accomplish, and it shows me that I and all women can have a place at the table. Quick update on the markets right now. The Dow has turned negative. The peak of the day, up 480 points. The S&P 500 lower as well. You're seeing the Dow Jones Industrials off by 90 points or so, and the S&P has dropped now by a quarter percentage point. The NASDAQ is still hanging on to the green, but just barely up a quarter percentage point when it was up more than 2% a bit earlier. So we'll continue to watch this. A lot of skepticism here around

the Fed, what it's doing, and whether it's going to take a toll on the economy as a whole. All right. Let's talk about Ford, which predicts it's going to lose $3 billion on electric vehicles this year. A painful part of the company's transition to EVs, but it still expects to hit profitability targets as a whole. Phil LeBoe spoke to the company's CFO about the company's guidance, Phil. Well, you know, when you look at their guidance today, I think people can a little bit of something away from this. If you are skeptical about EVs and Ford's ability, you can say, look, they're going to lose $3 billion. They lost $2.1 billion last year. Sure, they say they're going to be profitable, but I don't buy into that. That's if you're skeptical.

If you're optimistic about Ford's ability to use the cash that is generating into this transition, look at the numbers this year. The legacy businesses, when we're talking about internal combustion engine vehicles, I mean, look at they're going to bring, that's what they called Ford Blue under the new divisions. $7 billion. Ford, pro. They kill it when it comes to commercial vehicles. That's better than last year, $6 billion. And they're expecting, as they said last year, reaffirming their guidance of making between $9 and $11 billion. But it's that EV component. That's what people are focused on, guys. Why is EV the focus? If they're projecting profits of $9 to $11 billion, people are still

buying gas-engined machines. So why is EV the big, shiny thing for Ford? Well, it's not just Ford. It's all automakers. Look, it is. the future. That's where we are headed. Whether you believe it, five years, 10 years, 15 years, it is the future. And Ford believes that they can be profitable with electric vehicles. So by breaking it out into divisions, they think that there is clarity and will be clarity when they move towards profitability, which they're targeting 8% profit margins by the end of 26. When they actually move into profitability, whether it's end of 24, beginning of 25, that remains to be seen. They haven't given that much clarity. But they believe that if they can show,

people, look, we are profitable in EVs, then perhaps people will give them a greater multiple. That's what they're hoping for. That's what all the legacy automakers are hoping for. Correct me if I'm wrong here, but I believe I was looking in consumer reports, comparing a Ford F-150, a conventional truck and a Ford EV F-150. The price difference is vast. Well, it's not just that there's a difference in price. It's the cost component there. Well, the cost of making the car. The cost of making the car. The battery is killing. them on the F-150 lightning. So how are they going to make that gap compress? Well, that gets to the heart of how are they going to be profitable in EVs? And what they say

is that over the next four years, they will turn a negative 40% margin on their EVs into positive 8%. How? A couple of areas. One is going to be scale. As they build more, as they build more of their batteries, you add that. You increase your sales to about two million vehicles by 2026, the end of 2026. At the end of this year, they think they're going to be at 600,000. You would do that. And then they say, we're going to drive down costs with design, engineering, as well as the battery. They believe all of that gets them to profitability. But the real question for Ford, especially after the fourth quarter, is, look, you got a real cost problem in the fourth quarter. And that's in your legacy business. How can we be sure that

you're going to be able to get rid of those costs, not only in the legacy business, but also as you move to EVs. Interesting stuff. We'll be watching. Phil, thanks. Thank you. All righty. Up next, the Securities and Exchange Commission putting Coinbase on notice will trade that name and other key movers in today's three-stock lunch. Let's get to the three-stock lunch. We're sipping on some big movers of the day. Coinbase plummeting after the SEC warned potential securities charges could be coming. KB. Home surging on a surprise beat for its fiscal Q1 and Chewy lower after active users fell year over year, and Deutsche Bank downgraded their shares to hold, expecting further growth to be tepid at best.

Here to help us trade all three names, Courtney Garcia. She's senior wealth advisor at Payne Capital Management and a CNBC contributor. Courtney, good to talk to you today. Let's start with Coinbase. You have a sell on it. Why? I do. Several reasons for this, but Coinbase in general, I think, has always had regulatory concerns.

That became a lot more prominent with the FTX collapse. Now recently, as you just mentioned, you see that the SEC actually did come out with a Wells notice, which means there may be possible securities laws violations. And you're also seeing a lot more competitors come into the space. So you have things like PayPal, things like Square, even Fidelity, just got into Bitcoin and Ethereum trading. And so you're seeing that consumers are actually shifting to some of these bigger platforms which aren't necessarily going to have as many regulatory concerns.

And out on top of that, this is a company which isn't profitable, doesn't pay a dividend, which in this kind of environment, I don't think is the kind of company. and you want to be adding more money to. So for all of those reasons, I would stay on the sidelines here. That's a lot of reasons. Let's move on to KB Home. Tell us about that one. KB. Homes, I'm actually optimistic on.

I do have a buy here, and I have remained optimistic on the home builders here really for several months, despite what I think a lot of people are having concerns on. We're actually seeing this just recently. Home buyers are coming back in. There's this huge supply and demand issue. When you saw in January, mortgage rates take down slightly, you're seeing how many people are flooding back in to buy homes right now, but there's still not enough homes in there. People who have homes don't want to sell them and then be stuck with a six,

seven percent mortgage. So the home builders are really what's going to come in there. And that's where you're seeing things like KB homes, things like Lanar, are actually beating their expectations. And I think you're going to continue to see that, especially if we start to see rates come down later this year, is really going to benefit them. And you're also seeing concessions from some of the suppliers, which is going to benefit their margins overall. Okay. Our final name to today, Chewy, what do you have to say about Chewy and whether to buy herself? Chew have a sell on, which actually hurts me a little bit because I'm a very loyal, chewy customer. I'm sure I've got some dog food waiting for me outside right now.

But they actually did. I mean, they had a really impressive net sales increase, but you are seeing their customer averages come down right now. And they are facing a lot of competitors right now. So you're seeing the pet sales industry is huge, about $120 billion industry. And so you're seeing your Amazon's, your Walmarts, your Costco's are starting to get into that business. And they likely are going to start to take away some of their customers, unfortunately. And this is a company which really hasn't had a full year of profitability. And I just think for all those reasons, as much as I love Chewy, I would stay on the sidelines with their stock currently. Their customer service really is impressive.

Like the amount of time and energy they spend dealing with customers and making customers feel valuable is notable. I have to try them. Yeah, it stands out. The customer, I'm not going anywhere. I'll tell you that. Good to know, Courtney. Thank you for the recommendations there. All right, busy day on Capitol Hill.

In addition to the TikTok CEO, Congress is about to hear from Treasury Secretary Janet Yellen. What comments should we expect on the banking crisis? That will be next when we return on power lunch. Treasury Secretary Janet Yellen may have helped worsen yesterday's sell-off with her comments on banks. And in just a few minutes, she will testify in front of the House subcommittee on financial services on budget and economic outlook. But the bank crisis could be front and center. Kayla Taushy joins us now. Hi, Kayla. Hey, Ty. This annual bicameral testimony is usually meant to explain the priorities behind the

president's budget. That was released two weeks ago. But much of the questioning yesterday on the Senate side concerned how the administration and regulators are responding to continued weakness in the mid-sized banking sector. Secretary Yellen suggested the dust should settle before new rules are written. But in one exchange in particular, she said there would be no blanket guarantee, or at least no blanket guarantee for bank deposits, was being discussed. That comment appeared in contrast to earlier comments from her and Fed Chair J. Powell that deposits unequivocally would be protected. But that nuance underneath, the government would act to backstop deposits if there was a run on a bank. Absent that, no new policy for the whole sector

is being proposed by the executive branch. But the problem for the market, a case-by-case strategy requires another shoe to drop before the government would step in. We'll see. the secretary takes another opportunity today to clarify those remarks. Tyler and Katessa. So she is sort of diverging from what Powell was saying. Is that what is that the heart of this? What she's saying is essentially that there's not any sort of new policy that is being, that is being discussed among the Biden administration. But she and Powell both have said that regulators could come to the rescue if they needed to to backstop deposits that people should be confident about their deposits, but no rules that are going to change that in the meantime.

Kayla, great to see you. Kayla, Taushy. All right, markets turning negative now, although the NASDAQ is hanging on to a gain of half a percent right now. Thank you for watching Power Lunch. And thank you for being here. You're welcome. Just have you with us. Closing bell starts right now.