Power Lunch - Stocks Fall on Fed Fears 4/2/24

Episode Date: April 2, 2024

The Dow is down for a second day, continuing Wall Street’s lackluster start to the second quarter.Bond yields have increased as traders lower expectations that the Fed will cut interest rates in June.We’ll break down what it all means for you and your money.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Launch alongside Deirdre Bosa. Welcome. Hello. Nice to have you here on the East Coast. I'm Tyler Matheson, the rough start to the second quarter continuing today with the Dow down about 479 points right now. United Health, a huge drag on the index, costing the down more than 200 points all by itself. Changes to Medicare rates weighing on the health insurers today, and we'll have more on that coming up. Big Tech also tumbling today. The NASDAQ down more than the S&P on a percentage basis. And the so-called speculative tech trade is getting hit particularly hard. It's a bad day for Kathy Wood. Her ARC innovation fund is down 3%.

And Tesla, it's one of her biggest holdings. And it's falling after delivery numbers disappoint. We've also got Coinbase falling along with Bitcoin and Verve therapeutics losing a third of its value after its cholesterol drug caused side effects in a trial. All right. Is today's action a signal maybe that the market is turning just a bit? Those seven big tech names that carried the market last year, they're starting just a bit to fade.

In fact, they've been fading for some months in some cases. So should investors now look elsewhere? Are old names becoming cool again? Sima Modi is looking at the new look GE, which has been a stealth outperformer. Hi, Sima. Tyler, good afternoon. That's right. It's not often an industrial stock outperforms big tech, but that's what we are seeing with General Electric,

which continues to defy critics now up over 80% in the past 12 months, its highest level since 2017, outpacing the gains of a number of tech names like Microsoft, Amazon, and the broader NASDAQ. Wall Street really crediting CEO Larry Kulp for his bold restructuring moves, including his latest bet, spinning off energy into a standalone company, Vernova. Culp telling me today he's excited about staying on Agi Airspace and finding ways to further integrate artificial intelligence,

to the business. He also added that he's very optimistic on China, despite the disappointing economic data, sharing that airlines there are looking to modernize and expand their fleet. Now, as to whether the stock can continue its run, spoke to Tony Bancroft, who runs Mario Gabelli's commercial aerospace and defense ETF. He said GE remains one of their biggest holdings, and given the strong backlog that the company has, the valuation right now they say is justified. Tyler Indy. All right, Seema, thank you very much. Let's talk a little bit more on how to position in the market right now. David Spieker's chief market strategist at Turtle Creek wealth advisors.

David, always good to see you. Thanks for being with us. What do you make of or read into GE's outperformance in recent months relative to the Dow and relative to some of the magnificent seven stocks? Is it a telltale of anything? I think what we're seeing, Tyler, can be seen in other areas too. If you look at what happened in March, you had value outperform growth. You had small caps outperform large caps.

You're starting to see the market broaden out. It's not just the magnificent seven anymore. And investors realize if we're really going to have a soft landing and the Fed is going to cut rates, we need to start broadening out. We need to diversify. So we're seeing opportunity in cyclicals, in industrials like GE, in energy, in financials, as well as small cap. And that's where investors need to start focusing.

Tech has had by far the lion's share of inflows over the last 12 months. Valuations are still extended. It's really a good opportunity, and the market's telling us this, too, to look at other parts of the market in order to balance out our portfolios. At the same time, David, what's interesting in tech, they obviously have sort of the AI, the generative AI wins at its backs. But you've seen valuations actually come down. You have an Amazon with better profitability. You have an Nvidia which just blow out sales. So are they overvalued?

Do you have to be more discerning, not just buy the Meg 7 or even the Fab 4? One of the things that's encouraging to us is that we're seeing stocks actually trade on earnings growth, projected earnings growth, and not just on monetary policy. What's the Fed going to do? So, yes, I still think you want to own technology. Microsoft does a great play to own for AI. And you need to own those types of companies because they still do have some of the best earnings growth in the market. But at the same time, it's important, particularly if we get into what should be one of a recovery rally,

to own these other sectors as well, to divers. First, if I look for parts of the market that are less expensive, that also have attractive earnings growth potential. What about the small cap area? It has been, it's been hard to make money in that part of the market, relatively speaking over the past few years. What's the best play there now? Well, small cap has been hard, Tyler. You really hit that. I think one of the issues with small cap has been, the problem is there's a lot of companies within the small cap indices that don't generate a profit. it rising interest rates are going to have a bigger impact on small cap companies because they don't have the ability to weather that as well as larger cap companies do. But I think if you look at healthcare, that's a great opportunity in small cap. Some of the banks, some of the regional banks,

I think you can do well there too. Small cat really needs to pick up the pace. If we're going to have a true broadening out of the market and a true sustainable rally, we need to see small cap perform better. And that's one of the things we saw in March that was very encouraging. Right. Well, not exactly that way. In today's market, the Russell 2000 is the laggard. Another example, though, something out of favor that's coming back in a big way. That's oil jumping to its highest level since October. Pippa Stevens joining with us more. We're nearly at 90. Yeah, that's right, Deirdre. Brent is closing in on $90 here amid escalating tensions in the Middle East, as well as ongoing attacks by Ukrainian drones on Russian oil infrastructure, including today on Russia's third largest refinery.

This comes as OPEC and its allies continue to keep a lid on supply, while demand has remained steady. The climb in oil is also lifting energy stocks with the sector pacing for a record close for the first time in a decade. The recent dip in tech stocks mirrors an uptick in energy buying, as you see on that chart there. Now, Morgan Stanley recently upgraded the sector to overweight, noting it trades at two times the historical discount

relative to the broader market. So in other words, valuations still look compelling. Now, today's rally is widespread with a number of names hitting new all-time highs, including Diamondback, Marathon Petroleum, Phillips 66, and Valero. Meantime Conoco, Kinder Morgan, Oxy, Target Resources, and Williams, all hitting their highest in at least a year.

Peppa, thank you for that. David. What's your take on rising oil, and the impact on the broader market. Last hour, we were talking about Chinese demand, which looks like it could be increasing. Well, notwithstanding the issues in the Middle East and the geopolitical problems that are creating pressure on oil prices, I do think it's a good sign. If China's going to come back, if they're going to rebound and be a driver of world economic growth, you're going to see oil prices go higher now. But one thing we need to keep an eye on is we don't

want oil prices to go too high. Somewhere in that $80 to $90 range is probably a nice middle ground that doesn't create too much inflationary pressure, but is a good sign for the economy. And yes, we do like energy. Again, that goes back to our theory on owning cyclicals. Energy stocks have been a bit out of favor, but we do think that's a good place to be, particularly if we're going to have this soft landing and a renewed economic resurgence globally. Energy is a big and sprawly sector. Where specifically within that sector would you be putting money?

refiner, exploration companies, power companies. It could be a lot of different things. Yeah, the power generation area, Tyler, is very intriguing. When you think about the amount of power that's being required in the United States today and in the world, given the move toward electric vehicles and Bitcoin mining and all the demand for power. So anything that's related to power generation, and that would include fossil fuels as well because they're going to be powering these utility plants

are going to be able to fare well in this environment. What about AI and data centers? They require a lot of energy as well. Absolutely. And thank you for bringing that up. AI and data centers are probably the biggest factor in the demand for power. And so absolutely, you're going to want to own companies

that are going to benefit from the growth of data, the growth of data demand and data centers. And again, that's something you can own in the energy system. You mentioned China a moment ago and the possibility of better than expected growth in that country. Do you see China for the average individual investor in the United States? Is it investable today? That's a great question, Tyler. I think the average individual, if you're going to invest in

emerging markets' equities, obviously China's a big, big component of that, your best opportunity is to go to with an active manager who invest in China as well as other Asian countries that will benefit Chinese growth and other parts of the emerging markets. I don't think individual investors want to be dipping their toe into individual Chinese equities because there's still so much uncertainty and too many issues around the politics of communist China. But I do think that investors can own good, well-managed, active managed funds that own emerging market equities that understand the Chinese markets and can benefit in Chinese growth. Interesting. All right, let's move on to our last example of market rotation for this hour, at least. Bitcoin falling 6%

while gold rises to a new all-time high, and Dom Chu has been looking at those numbers. Hi, Dom. All right, so, Tyler, let's get that new benchmark price right out there with regard to gold. The record price earlier today was 2297 spot 90 for gold futures, and right now, if things stand, this will be the sixth straight day for rising prices. Yesterday's record was powered by inflation data coming in as largely as expected late last week, which then led to expectations about the Fed rate cuts staying on track for later on the summer. Now, today, that tailwind faded with interest rates on the rise.

But now geopolitical tensions are on the rise in the Middle East and elsewhere, and they've led to that safety or haven bid for those gold prices. Now, that's helping to push gold mining stocks, like Newmont higher. You can see they're up by almost a percent. Also, the Vanek gold miners' ETF, you can see there's up about half of one percent. And even silver futures are notably higher as well, up about 4 percent right now. Meanwhile, it's not the same story for that so-called digital gold, right, aka Bitcoin. Those prices are falling. $4,000 or so, $65,000 and change is the current mark, as risk

aversion takes a bit more of a step towards center stage, given those interest rates on the rise. Now, prices of that largest cryptocurrency are now more than 10% below the record levels that we saw just about three weeks ago. That's working its way through the crypto ecosystem, stocks like Coinbase, the exchange operator, crypto minor marathon digital, also business software company, Microstrategy, which holds a lot of Bitcoin on its balance sheet. You can see those shares, down six and a half percent right now. So a big move in digital and non-digital gold tie. Back over to you. All right. Thanks, Dom. David, let's turn to gold first and then to Bitcoin. Talk me through your position on both of those. Well, gold is an interesting juxtaposition with what we're

seeing with regard to the Goldilocks and soft landing narrative. You wouldn't expect gold to be doing what it's doing if we're truly going to have a soft landing and you've got cyclical stocks and small cap and others outperforming. So one of the things that to me, is a big factor there. Outside of what's happening in the Middle East and some of these other issues that are creating some angst is the fiscal situation here in the U.S. If I'm as prudent investor and I see that the U.S. is going to run another close to $2 trillion deficit and we're going to have to issue new treasuries and we're going to be at, I don't know, $40 trillion in total debt before long, I don't want to own Bitcoin and I'm probably a little leery of the Fiat currencies

like the dollar. Gold is a great place to invest. And I think that's a big part of what's going on. Ultimately, over time, though, you wouldn't expect gold to be rallying if we're truly going to have a sustainable stock market rally and a true soft landing and Goldilocks type environment. That's one of those things we need to keep an eye on that potentially could be a red flag. How about Bitcoin? Bitcoin is a risk asset. Bitcoin is not a substitute for fiat currency. I think the comment was digital gold. I wouldn't call it that. Bitcoin's purely a risk asset. Bitcoin is something that you own when risk is up, when risk appetite is up. And the other thing is Bitcoin does the best when liquidity is flush.

We're seeing liquidity come out of the market. Treasury liquidity is declining during tax season, probably temporary given it's an election year. But as liquidity declines, Bitcoin recently hit an overbought level, you're going to see Bitcoin suffer from that. But I would never want to own Bitcoin in lieu of the dollar or other fiat currencies because I was concerned about the fiscal situation. But that is the entire argument that Bitcoin Bulls make. Do you think it's time to put that to rest?

What are they seeing? And when does it maybe act like a safe haven? Bitcoin Bulls are talking their book because they're invested in Bitcoin and they want to see it go up. Personally, I've yet to see it at some point in time, if cryptocurrency becomes regulated by the central banks around the world, that'll be a different story. But then it won't be nearly as volatile as it is today. And you won't have the opportunity for the gains you have now. But as of right now, I just don't see it and we don't see it as a viable alternative to the dollar or the fiat.

Okay, let's talk about actual gold, the precious yellow metal. An idea that I talked about with the guest last hour is the fact that if China's economy is recovering and you're seeing the consumer bounce back there, are they going to be spending their money on gold? I mean, traditionally, typically, that has been what has happened, but with more investment options, perhaps the stock market, which has been under so much pressure. Do you think that happens this time around? Could that sort of underpin higher gold prices? Well, I think you're talking about reserves going into the gold and out of the dollar. And I think that is obviously something that could happen. The problem is, or the headwind to that theory, is that there's no market in the world that's large and liquid as the U.S. treasury market is.

So as countries like China are developing reserves and they need a place to park the reserves, there's still going to be demand for treasuries. Gold will take a piece of that, but I don't think that really is a threat to the U.S. Treasury market or the dollar in general longer term. But yes, near term, particularly given with what's going on here in the U.S., rates are going to come down. The fiscal situation doesn't look particularly attractive. I can see central banks around the world looking at gold as an alternative, at least in the short term, to the U.S. dollar and treasuries. I was actually thinking about consumers, but it's a good point. So maybe both of those together. David, thanks very much for being with us today, David Spika.

Coming up, a show of force against Apple, comedian John Stewart, saying the tech company asked him not to interview the FTC chair on his Apple TV Plus show. We will discuss the growing problems for the company. That's next. Welcome back to Power Lunch. Apple shares. They're holding up relatively well in today's market, down less than 1%. The company, though, we've been talking about it facing a number of issues, including a DOJ lawsuit, and now a new potential, embarrassment.

let's call it for the company. John Stewart says Apple discouraged him from interviewing FTC chair, Lena Kahn, on his short-lived Apple TV show. Joining us now to talk more about this is CNBC technology correspondent. Steve Kovac, we're not supposed to worry about content. There's so much out. Generative AI strategy, the App Store, Europe. Yeah, and this is becoming kind of a PR blunder. So we've kind of learned some of this last year when John Stewart left Apple and the reports were he wanted to do a story on China, artificial intelligence, and now we're learning from what he said last night.

He wanted to bring Lena Kahn on an interview, and Apple told him no. By the way, now that he's on the record about this, I asked Apple. They're being silent. I think they kind of want this to blow over. But what's interesting about this is, and a lot of commentary has already been bandied about, is this kind of ties back to the DOJ lawsuit. I just want to read you this one part. It's kind of bananas, but I'm going to read you this part of the DOJ lawsuit.

Quote, Apple's conduct extends beyond just monopoly profits and even affects the flow of free speech. For example, Apple was rapidly expanding its role. as a TV and movie producer and has exercised that role to control content. Interesting argument here. Come on. Basically saying, you know, because Apple is rich and successful, they don't get to choose. That's like saying... They're like a tiny, tiny, tiny players.

But it doesn't even matter how big they are. That's like saying the people in this building right now can't decide what airs on CNBC. The government's positioning here seems to be, I don't know, to compel Apple to let John Stewart interview Lina a con or do a story on AI? No, that's not how it works. They had Apple was their employer, his employer. That doesn't mean it's not embarrassing or a blunder for Apple. It's a bad PR look, but it's not illegal. And it's just really interesting that DOJ is kitchen sinking everything. So I take it you would say if we extended this back to other companies that have been assailed on free speech grounds. Same thing. The company is saying, we are the publisher here.

We are the owner of this platform. We have the right to. to not post your posts. Just like we have, and this has been going on since Elon Musk took over Twitter, now X. And people seem to forget that First Amendment doesn't give you the right to post on Twitter. It gives you the right to say it. It gives you the right to say it. Exactly. That a platform owner should be compelled.

So if Elon Musk wants to make it a safe space for Nazis to post, that's fine. He has a right to do that, but it's not illegal. And the government doesn't get to tell him that. You know, when I hear you read that part from the DOJ lawsuit, it just makes me think that they're undermining their own argument by going after things like this where Apple is just such a small player in the streaming wars. But I also wonder how it relates to sort of this broader picture, right? We say that Apple, the biggest downside of what's happening right now, all of the scrutiny from regulators, is that it's distracted. Exactly. And this is just one more.

But yes. Does Apple have to deal with this? Do they have to do anything? On this specific thing, no. And they're not doing anything. They're literally being silent on it, just kind of letting it blow over, letting John Stewart say what he wants to say. But does it hurt? I mean, so much of their proposition, right?

They have to go out to the biggest Hollywood producers and talent and say work with us. Does that hurt them? Yeah. Welcome to the media business, Tim Cook, because you have to deal with different creators, with different opinions who want to do different things. And some of them, like John Stewart did, aren't going to want to, you know, have to do what you want content-wise. Did Stewart air any of the stories that, the China story? No. Well, he did the AI story last night. He did the AI story.

It's unclear if that was the exact AI service to do. And he didn't interview with Lena Con on Apple's? On daily show last night. He did it on Daily Show last night. Was he critical of Apple during that interview? That's where he brought it up. He basically said to Lena Khan, Apple didn't want me to interview. Didn't want me to have this conversation with you.

And now that I'm on Paramount, I can't. Is it Paramount? I think it's Paramount. No, it's a well, Paramount, but Comedy Central, yeah. Combe Central. And Paramount Plus, I think you can share it too. But, I mean, this is not the first time Apple has played content moderator. You might remember years and years ago, they booted Alex Jones off the podcast app

because of some nasty things he was saying related to Sandy Hook and so forth. Well, this was only part of the reason that John Stewart left Apple. There's supposed to be even more stories they wanted to do. So this could just be the start. I'm looking forward to see what he does on China. Which puts Apple in a really tricky situation. The AI story is interesting, but the China story is also interesting because we know so much of Apple is tied up in China.

The last thing they want to do is have a very critical China story out there that they produced. And so, of course, he told him, no. This might work in their benefit. It's a bad look, again. If he goes and does a critical Chinese story, not with Apple. It's a bad look for Apple. I want to be clear.

It is a PR blunder for them. It is embarrassing, but not illegal as the DOJ and so many others online have been alleging. All right, Steve, thanks very much. We appreciate it. All right, further ahead, a deep dive into home prices. We'll explain how much more a monthly home payment is today than just a year ago. We'll be right back. Welcome back to Power Lunch, everybody.

While stocks are falling today, bond yields are rising. There is a connection there. And here to explain it all is Rick Santelli in Chicago. Hey, Rick. Hi, Tyler. Indeed, they are rising. You know, in many ways, this is an extension of the data that was released on Good Friday. It's still affecting markets.

It's still the talk at water coolers. And as you look at the intraday of tens, you can see, well, it looks like it's these stock. pair it up with yesterday, and you can see the entire treasury curve has traded above yesterday's yields are below. Yesterday's low prices. Year to date, the high yield close for tens and a double top is at 432. Anything above that, give it a half base point. 433 or higher is going to most likely technically perpetuate selling, pushing yields higher, and we're going to go talk to a trader about exactly why.

How you doing? Very good. Chep, we see that yields are moving higher. As a matter of fact, right now everything's in play for fresh 2020. 24 high yield closed in treasuries, and the equities don't seem too happy about it. Well, I mean, we talked about this last time. Stagflation is here. It's not about growth, really, as much as it is about those structural,

the de-globalization, all the other things underneath the hood. On top of that, now we're getting commodities going higher. Sounds like another time we know the 1970s. It rhymes. And you know, the 1970s were a complete different time. You and I agree with it. But one thing that ties it all together is that the globalism forces that brought us disinflation, have reversed. You can talk about China until you're blue in the face. I don't think those

supply lines are going to come back the way they were pre-COVID. Do you? No, I mean, populism is driving de-globalization. It's also driving fiscal spending. All these things are sending money to different people. It's not just about growth, right? It's about who's getting that money, and that's a very different change. And now another thing nobody really noticed is that yesterday we closed 200 basis points above boons. 200 basis points. Why do you think that is? Well, at the end of the day, you know, the structural inflation is here to stay. Right? The money goes to where the opportunity is. And these things are going higher. We talked about it. If you continue to choose in a stagflation environment to go with growth as opposed to dealing with inflation, what do you think is going to happen, right?

That's what Powell's telling us. He continues in the face of higher growth and more inflation to prioritize the growth. And in election years, that's what happens. And you know, Paul spoke after those numbers released on Good Friday. And I was kind of shocked. He said, well, there was nothing surprising there. I was surprised because we made zero. progress. Well, if we're not dealing with inflation, right, you're going to see more of it. You're going to see a steepener. That's what we're seeing. And it, you know, it can go very slowly at first, but, you know, these things break. Once the liquidity changes and the reflexivity of the markets changes, you can get all of it all at once. And so I'd be very careful at these

levels and rates. Chem, thank you for your time today. I know it's a busy session. Deirdre, Tyler, back to you. Rick Santelli, thank you very much. As we had to break, a quick power check on the positive side, Philip 66, the company's starting production at a rodeo plant. On the negative side, Humana hit by lower than expected Medicare rates. It is down nearly 14%. Details further ahead. We will be right back. Welcome back to Power Lunch. I'm Kate Rooney with your CNBC news update at this hour. New lawsuit aims to force a long-awaited Biden administration ban on menthol cigarettes. U.S. health officials initially wanted to put the ban in place last August. But the White House and those officials said they would need until this March to review that

rule. Anti-smoking groups filed the suit as soon as that deadline passed. Katie Perry, Stevie Wonder, Billy Elish, and Peter Frampton joined dozens of other musicians and calling for curbs on artificial intelligence in the music industry. They signed onto an open letter saying companies need to stop using their works to train AI models. The letter claims the practice robs musicians of their royalties. And Elon Musk's ex announced the appointment of two new employees. to oversee safety on the platform. It comes after two people who previously held the title of safety head left the post after less than a year.

X has faced a rocky 18 months with Musk at the helm. The site has seen the disbanding of its trust and safety council and an advertising exodus amid concerns over antisemitic and other toxic material on that platform. Dibo, back over to you. All right. I'll pick it up. Thanks very much. Kate, meantime, the Dow right now, down about 450 points, 437 to be exact.

437 to be exact. Bob Pisani is at the New York Stock Exchange to explain more on what's driving the markets right now. Hi, Bob. Tyler, all the selling really happened at the open. Just take a look at the S&P 500. It's been remarkably narrow trading range. Down 1% right at the open? Essentially been down

1% the whole day. So higher yields are the problem here, and the 10-year yields breaking out to the highest level since the end of November. And this is really on concerns about sticky inflation and stronger economic growth. If you look at sectors, when rates move up strong, high growth stocks usually get hit. And of course, that means tech. And semis are all getting hit hard. You see the semiconductor

down about 2% here. Arc Innovation, of course, Kathy Woods fund. It's a proxy for speculative tech down about 3%. It's down about 5% in the last couple of days. When rates go up, you see home builders also usually get hit. Lanar, Horton, Pulte, all down about 3%. Just remember, though, they're down 5% in the last few days. They're up about 50% since November. So you've really got to keep this in perspective. These a pretty modest declines here. There's a totally separate issue with health care getting hit hard on where the government's only going to allow a small increase in Medicare advantage, 3.7%. That's a disappointment to the health care providers who wanted more. Remember, we have elevated utilization rates that have been reported from these two. So you're getting a bit of a double whammy with these

stocks. And that's a major story today. You see United Health down 7% there. One bright spot is energy. Oil's been over $85. That's the highest level since October. We got new highs. The refiners have just been Fly and Phillips and Valero, the exploration of production companies, Conoco, Pioneer Natural, all hitting 52-week highs as well. So just wrap it up, just take a look at the S&P 500. Remember, on Thursday, we hit an historic high. We are 1.3% below that historic high, essentially. So just sort of keep that in mind, guys.

The important thing is the market uptrend is still very much intact right now. Yes, despite the red on your screen today, We've been talking about commodities a lot today. When you see higher bond yields, the sort of gut reaction is that tech, which you're buying more for growth, isn't going to do as well. But I go back to last year when you saw these higher bond yields, the mega caps held up very well because they're more garpy, right? Growth at a reasonable price. Do you think the same thing could happen this time around? They're going to prove more resilient than sort of some of the other sector, some of the other more speculative tech.

You mentioned Kathy Woods, Ark, which is not surprisingly down. Right. And the garb story is very important because they're not stupid. so we're looking for what 32 times on invidia sometimes around there and so given the growth potential for companies like those these numbers are not crazy so yes I think they're going to hold up a lot better this is a little bit of a knee-jerk reaction here and given the moves that we've had really people should be very happy there's first off we're getting strong economic growth part of the reactions with some yesterday's numbers as well which was stronger than expected generally

So the market has already gone from the expectation of six interest rate cuts to three and hit historic highs on that. Now we're going from three to two and a half maybe and maybe towards two. And we're still only 1.3%. When you combine the resilient economy that we've had with the very strong advanced decline line, that's a good sign for the overall market still. It's a great point. Let's not forget how bullish the first. quarter was as well. Very good quarter for equities. Let's look at chips, the chip ETF SMH lower by nearly one and a half percent right now. And this comes as investors are waiting to hear

from Intel this afternoon. Christina Parts-Nevilos here with more on that. What do you think it could be? Oh, we know it's about the foundry business. But Intel is essentially looking to convince investors that they're going to have better profitability in this webinar that's going to happen this afternoon. It plans to separate the economics of its internal fabs from its actual chip designs. That means a separate profit and loss for chip manufacturing hubs to better highlight the metrics of Intel businesses. And they do that with the hopes that maybe analysts will value Intel with the sum of parts analysis and maybe conclude that Intel stock is undervalued. But investors, as we know, just over this past year, are pretty cautious.

And you see that in the stock reaction. Even if you don't know the names on your screen, I'm sure you know. InVIDIA, Intel, only one in the red down, almost 13% compared to Broadcom, you know, up 18, Nvidia, 80. We talk about that a lot, Marvell, et cetera. But Intel shares just really are not riding that AI wave, even after recently winning roughly $20 billion in government aid and loans to build those chip hubs on American soil. And that's because near-term fundamentals are still trending flat to negative. I'll start with PC sales.

Yes, they're rebounding, but it's a slow rebound. Intel's programmable chip business. Altera's trending lower. Its inventory levels are quite high there. And then you've got pickup and server demand, which is good, but AMD has consistently been stealing market share from Intel. And then you got, last but not least, the big negative that you'll come up today, Intel's foundry business. You're seeing on your screen Ohio right now. That's just the work for that. It's said to be losing lots of money at all their various plants.

And this Ohio one is already delayed until 2027, possibly 2028, according to Pat Gelsinger. So that's adding to investor caution right now about Intel's massive turnaround plan that we're still waiting to see. What's the difference between a foundry and a fab? It's the same thing. Just think of it like a manufacturing hub. They're the same. And it's unfortunate because we talk about, chips all the same, and then there's GPUs, CPUs, accelerators. But with this, just think of it like a hub manufacturing where they build the chips, much like Taiwan Semicter.

Well, that's what distinguishes TSM. TSMC, I always want to flip the word, letters in there, TSM from a lot of the others. They don't design their own chips. They make for others. Which is why it's so important for Intel to actually separate the two businesses and say, you know, we have a distinct wall between our chip design business, which will not only benefit us, but maybe we'll design chips for other companies, and then our actual manufacturing business. Which could manufacture for them and for other companies.

Yeah, well, that's the case now. Like Microsoft at their last Foundry Day announced that they would be building some chips there. We think maybe it's the in-house chips that Microsoft's been building and working on. Intel would be one of the beneficiaries. But the problem is how many other customers are actually going to sign on with Intel

so that they can actually be the second largest foundry in the world by 2030? And let's not forget, Intel is an American company. That's why this is so important because the existing found. that are at there, they're located in Asia. So there was so much skepticism about this whole plan when Pat Gelsinger came back and first announced it, the fact that they're moving towards, you know, actually breaking it out. Yeah.

Even you're talking about years advance of something. And the valuation reflects that, though. You said that they wanted to say maybe they were undervalued when I look at the current price to earnings ratio. It is a little hard. You're in Vidia. Yeah. So if you're going to look at the, especially for 2024 numbers, 2025, but really quickly,

Pat Gelsinger, I spoke to him just a few weeks ago on a call, and he was just saying that we lost our manufacturing here in the United States over three decades to Asia, specifically TSMC. It's not going to happen in three to five years. So we mentioned this chipsack funding, 53 billion. They all think it's not enough. There should be chipsack too. So let's see if that happens.

With the billions that China's spending on. China, Japan, everywhere else. Thank you, Christina. After a down day, you want to hear from some of the biggest names in the business. And we have two of them joining CNBC tomorrow, so don't miss hedge fund manager in New York. Met's owner, Steve Cohen. He's going to be live on Squawk Box at 815 Eastern, followed by Greenlight Capital founder, David Einhorn, joining us from the Sone Conference right here on Power Lunch at 2.15 p.m. All right. Still ahead. A real estate reality, Chet, Conventional Wisdom, says home prices should be easing, and yet they're not.

We will do a deep dive on the latest data, including how much the average monthly payment has grown in just the past year. We'll be right back. The spring housing market is coming in hot, making it harder, not just for new buyers, but for move-up buyers to afford a home. Diana, very stunning numbers on what it takes to get in really puts it in perspective how much has changed. Yeah, Deirdre, home prices in February were 5.5% higher than February of last year, according to CoreLogic. And while that annual comparison is now shrinking very slightly, the price gained from January to February was actually nearly twice what it was. was historically pre-pandemic, suggesting this spring's housing market started out strong despite another rebound in mortgage rates. The trouble, of course, continues to be lack of supply.

There are more new listings now than last spring, but supply is still 40% below where it usually is this time of year. We're still seeing that lock-in effect of current homeowners who won't sell because the cost of moving up is just so high. Well, how high? New numbers from ICE mortgage technology paint a pricey picture. In the 22 years before, before the Fed started raising rates, for the average homeowner moving to a similar house across the street wouldn't change their monthly payment at all. Upgrading to a 25% more expensive home would increase their monthly payment of principal and interest by 40% or about $400. But fast forward to today and for homeowners who have rates near record lows, buying their own home in the current market would increase their monthly payment by 60%. And trading up to a 25% more expensive home would result in a 132% increase in that monthly payment or about $1,800 more.

Now, this is an average for the nation, so it will vary to market to market, especially out West where homes are priciest. Back to you guys. Diana, those are some remarkable numbers. What kinds of buyers or sellers are actually willing to withstand those kinds of increases? Well, first-time buyers who don't have to worry about what they're selling are getting. into the market or at least trying and they're maybe trying to use all cash and get a mortgage later to make themselves more competitive. There are some people putting their homes on the market. Look, sometimes people simply have to move for life reasons or potentially people who are

downsizing. And in that case, they're still in a pricey market, but they would be paying less. So those are really the buyers and sellers in the market. Is the typical formula still 20% down and 80% financed or is it different today because people might be moving into these transactions with slugs of cash that could up the amount they put down? Well, if you have the cash, look, it's going to make you much more competitive and you'll get a lower mortgage rate if you put more down. But really, we're seeing people go toward FHA loans, which are 3% down and paying that mortgage insurance.

So they don't have to put down so much up front. And for the first time, buyers, it's getting that down payment that is really the hardest entry to this market because they just don't have the cash with rent so high. All right, Diana, thank you very much. Diana Ollick reporting. Coming up, shares of Tesla lower after a big miss for the first quarter in deliveries. We'll ask our trader if it's time to buy the dip or stay away. That and more when we come back in two minutes.

Check out shares of United Health. It is the biggest reason for the Dow's big drop today. Joining us now to explain what is ailing UNH and other health insurers is. Bertha Coombs. Bertha. Hi, Deirdre. It's basically Medicare advantage. The insurers are facing disappointing payment rates for 2025 at a time on higher medical usage among seniors and a competitive market is already pressuring margins. Now, the Centers for Medicare and Medicaid says in 2025, MA plans will receive a 3.7% payment increase on average. It's the same thing they said in January. People thought they were going to raise it a little more. Stevens analyst Scott Fidel says the

effective rate amounts to actually a 16 basis point cut, taking in other factors. For Humana, well, its shares are sinking to a four-year low on the news today. After CMS's initial notice, Humana calculated that rate would amount to a 1.6% cut for its plans. With the rate now confirmed, the B of A analyst Kevin Fishbeck cut the stock to neutral, saying the rate environment poses a very big headwind for Humana, which gets 70% of its revenue from MA. Now, United Health is just as big in Medicare Advantage, but on the Optum side, that's its services side, with 90,000 doctors, it can control medical care costs a bit more easily than most of its peers. CVS Health-Ectna can also get a boost from its recently acquired Oak Street Health Primary Care Services. Cigna is in the process of selling its small Medicare Advantage business, so that's why you see they're not really getting hit so hard.

This rate pressure is coming at a time when seniors are utilizing more medical care. And cutting back on services or raising premiums risks losing market share. So it puts them in a tough spot as they look to 2025, Tyler. All right, Bertha, thanks very much. Bertha Coombs. Time now for today's three stock launch. We're going to pick up on that thought about the insurers here with our trades. This is Scott Nation's, President of Nations indexes.

And first up today, Scott, is the aforementioned Humana. What's your trade here? Tyler, this is the long-term buy, even though, as Bertha laid out, lots of problems in the Medicaid Advantage space. Humana is the worst performer in the S&P down 14%. So why is it a long-term buy? Well, because the Medicaid Advantage program is generally a great business. And with a forward PE of just 18 for Humana, it's fairly priced.

It's not cheap, but it's not expensive. I'm not a big fan of technical analysis here, but for Humana, the relative strength index, the one technical indicator I really pay attention to says it's screamingly oversold here. Up next, D.R. Horton, Wedbush downgrading five home builders, including D.R. Horton, to underperform from neutral, saying a seasonal stock decline into summer is likely. We're just talking about this with Diana. shares are down about more than 3 percent today. So off it's low. Scott, what is your trade on D.R. Horton? D.R. Horton is a buy, but brace yourself. And I'll explain why in a little bit.

because the home builders have done a wonderful job of managing higher interest rates. DR Horton is higher over one month and one year time periods. Forward PE of just 11 means it is a bargain, but EPS growth is not going to be enough because with a beta of 1.6, DR. Horton is just about half again as volatile as the overall market. So again, forward P.E. of 11 means it's a bargain, but with that beta, it means, hold on to your hat. All right, let's move on to the stock that everyone used to love, but now everyone likes to

whoop on. That's Tesla, shares of the EV maker under pressure after reporting deliveries have dropped for 8.5% from a year ago. Your trade, sir, on Tesla. Tesla is a hold to a cell, as you can see there, down 5.5% on that news. The problem is that the deliveries being down 8.5% was worse than was expected. It's the first year over year declined for the company in deliveries since 2020. And I think, Tether to your point, I think investors are finally getting over the crush that they had on Elon. They realize the company has to produce. And with a forward P of 55, Tesla has to grow just for the share price to stay in place. And it just fell out of the 10 biggest names in the S&P 500. It's now behind both J.P. Morgan

and Visa. And so it's tough to see how the bleeding is going to stop. for Tesla. Scott, finally, last word from you on what we're seeing in the markets today. It feels like there's worries growing about how many rate cuts may or may not be on the table this year. But could you make the argument that a healthy economy is better for stocks than looser policy? We started the day with a big increase in the 10-year rate. We had a big increase in the 10-year rate yesterday. So some ugliness in as far as stock prices isn't to be, shouldn't be a surprise anybody. My takeaway is this. With the unemployment, rate below 5%, and inflation at nearly 3% or above 3%, why in the world would we expect

the Federal Reserve to be cutting rates in June? All right, Scott, thank you very much. Scott Nations with us today. We will be right back. Let's look at the markets for you. The Dow Industrial is off about 1%, 430 points. It's been there for the last couple of hours, rather stable. The main reason, as Bertha Coombs pointed out, or one of the main reasons, is a severe

sell-off in United Health. United Health is a $400 a share stock. It's meaningful because the Dow industry is a price-weighted index. So a stock at that level of price will affect the Dow more than it would affect, for example, the S&P 500. There you see it at 457, one of the two or three highest price in the Dow along with Microsoft. And some of the air coming out of the tech trade a little bit. But as Bob Pisani was saying earlier, it was such a strong first quarter that this may actually be a sign of a healthy market. Speaking of air coming out, air coming out of Bitcoin today, down really rather significantly the past couple of days.

We'll keep an eye on that one for you. And we've got a big guest lineup tomorrow on Power Lunch. Thanks for watching.