Power Lunch - Stocks slump, big banks beat and LA’s housing market standstill 10/14/22

Episode Date: October 14, 2022

Stocks slump into the close as investors digest the latest inflation data one day after an historic turnaround. Plus, an LA realtor tells us why the real estate market is at a standstill. And, trading the week’s biggest leaders and laggards. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody. Meantime to power lunch, long with Contessa Brewer. I am Tyler Matheson, and here's what's ahead. October living up to its reputation. Stocks fall after yesterday's historic rebound with volatility gone wild. A market veteran will tell us why he is betting on big gains, big gains over the next year, and the stocks that will lead the way. And deep freeze, the once hot LA housing market turning a little bit chilly.

Buyers and sellers at odds, logjam. Deals coming to a halt. We'll talk to a realtor on the front lines who says this is unlike anything she's seen before. Contessa. All right, Tyler, thank you for that. And stocks are lower after the University of Michigan Consumer Survey showed inflation expectations increasing. Now the Dow had been up 390 points at the high today. Now look at it, down 263 points off, nearly a percentage point. The S&P 500 has fallen 1.7 percent. And the NASDAQ leading lower down 2.2 percent off by 230. points yields again getting higher. The 10-year yield breaking through 4% up from an earlier level of 3.8%. Look at that. And then we're looking at the financial sector, holding onto its gains after earnings reports from some of the world's biggest banks. J.P. Morgan, Wells Fargo,

Citigroup all getting a lift. Look at J.P. Morgan is up by 2.5%. Wells Fargo up 2.8 and you've got Citigroup 1.2. But look at Morgan Stanley down almost 5% on an earnings report. that went the opposite direction. Leslie Picker tells us why the divide, what the results tell us about the health of these banks. And I don't know, Leslie, what does this say about the looming threat of recession? Oh, yeah, the R word was definitely on display today, especially on the earnings calls. But as you mentioned, Contessa, J.P. Morgan City and Wells Fargo able to notch beats in the third quarter, thanks in part to their exposure to rate hikes, driving big boosts in so-called net interest income. That's a profitability metric defined as the revenue generated from loanmaking

minus what banks pay out for deposits. For the most part, those NIA figures and related guidance came in better than expected. But for firms more exposed to, say, volatile markets and investment banking, like a Morgan Stanley, the quarter was a bit tougher, and that's just because of their business mix. Morgan Stanley posting a miss and declining top and bottom lines, thanks in part to a slump in investment banking and muted equities trading in particular. Recession, as I mentioned, top of mind for the bank executives who spoke on the calls today. Here's Citigroup CEO Jane Frazier, who said the U.S. economy remains resilient, but they're seeing signs of slowing. It is all a question of what it takes to truly tame persistently high core inflation.

Now, history would suggest that that will be quite a lot. and for some time. Therefore, we could well see a mild recession in the second half of 23. We believe the U.S. economy is well positioned to withstand it, all else being equal in the geopolitical arena, that is. Her comments and timeline echo those of CEOs of J.P. Morgan and Morgan Stanley on their respective calls today. As such, the banks stowed away hundreds of millions more for loan losses

and remain pretty conservative with their capital as they brace for what's to come. You know, it's interesting because, Leslie, even with today's moves, you're looking at the banks still trading at roughly book value. So what does it take then, I don't know, to get investors over that hump? Yeah.

So despite all the commentary about macro, analysts will say that there's still this overlay of uncertainty, this overlay of concern about what the future brings. And even Jamie Diamond spelled it out on the call about, you know, there is still a probability that we see a soft landing. There's also a probability that we see something more adverse and more of a severe hard landing. It's just very unclear exactly how all the cross currents are going to play a role. So we heard that from all the banks. Investors really want to see some clarity on that. They want to see a real capitulation in the

stock prices and banks truly pricing in a recession themselves before they feel compelled to dip in. Leslie, thank you. Appreciate that. Our next guest is putting his money into J.P. Morgan says the S&P will make its way higher over the coming year. Let's bring in Doug Butler, portfolio manager and senior VP managing director with Rockland Trust. Great to see you today, Doug. So tell me why JPMorgan Chase, what do you like about this bank at this moment? At this moment, you know, again, what they did today was they actually shored up their balance sheet. They took additional reserves.

They've really built out, you know, a fortress that can withstand a recession if it does indeed come. But what they also have is, and you saw that with Morgan Stanley, they have exposure to the capital markets, they have exposure to Main Street America. And we think they are the best franchise and also the most attractively valued stock. Now, City, you had the City CEO earlier. Cities are very inexpensive stock, but we don't love their positioning as opposed to JPMs. And where do you see opportunity then, Doug? You know, we see them as actually for J.P. Morgan, the opportunity we think is, we think there's significant upside, especially because we're not as convinced of a severe down recession. One of the things we think is we think that the upside is probably being underpriced. We think that there's sufficient strength there. And we also think that these additional reserves, you've seen they came in under on. like non-performing assets and bad loans. They're reserving, but they may actually end up

releasing these before having to take them, assuming we don't get major default, and we don't get a major, either geopolitical hit or a major economic hit of the Fed pushing it sort of even past the five level. You're starting to hear talk of that, and that to us seems unlikely. But you just mentioned three things that if they happen, they could scramble all the eggs, right? Oh, yeah. Like, I mean, it's funny. Jamie Diamond, I think a week ago talked in Europe about like the market could be down 20%. Well, yeah, it could be. It could be off 20%. Do we think the odds of it being down 20% from here a year from now or up 20% are the same? No, we think that there's probably a two to one odds in favor of the market being sufficiently higher, sufficiently above the 4,000 level on the S&P next year, relative to it being. down below 3200. That's something to look forward to. I mean, that's good.

I feel better now. Christmas comes early. Doug, I like this. I mean, let's talk. You just mentioned something that was sort of interesting to me, and that was, while City is well priced, you don't like its franchises as well as you like the franchises, or I think that was, that's maybe my word. Yeah, I mean, I think.

So what is it about City that makes them less desirable than JP? I think City's more exposed. internationally. And we're still not sold on necessarily a huge European recovery, a huge South American recovery. You've seen really, really poor performance of the Latin American countries. I also think, again, J.P. Morgan has a better positioning in the capital markets. They have much deeper penetration than Main Street, America. So I think that outside of Bank America, which right now doesn't have quite as great a balance sheet as JPM, Look, we like JPM the best.

And of they're the only bank we currently own in the portfolio. Okay, so let's talk about other stocks then. I see you like Merck and you like Nextera Energy. Want to run through those quickly? Sure. You know, Merck, it's the, it's got the, it's got Gardasil. And it's done fantastically with its core franchise. but what we think is really undervalued is sort of the animal health franchise.

The vaccine franchise is actually, we also think people are wildly discounting that. Okay. And we think that that's undervalue. And Next Terra? Next Terra, it's that, look, the renewables piece, we think you're getting that right now. We think the core utility business is worth $50 to $55, probably $53,000. Stock's trading, I don't know, today. Yesterday it was trading like 73.

We think the renewables portion of Next Terra is worth some. somewhere between $40 to $65. All right. And there you're seeing it trading at 72 right now. Doug, thank you for that. Appreciate it. All right. Thank you very. Thanks a lot.

Bye, bye, bye. It's higher in a year, says Doug. All right, Americans' expectations for inflation rising in October, that according to the University of Michigan, which is a closely watched indicator for Fed officials, by the way. It follows yesterday's hotter than expected CPI report for September. But in a new CNBC op-ed, our next guest says there's, plenty of evidence that prices are actually falling across the economy. Ron Insana is CNBC senior analysts and commentator. He's also senior advisor to Schroeder's North America. He joins us now

with his deflation checklist. Where are you seeing it, Ron? Disinflation checklist. Disinflation, not deflation. I'm not ready for deflation quite yet, Tyler. Listen, I think there are a whole host of areas where we're seeing goods prices begin to fall, inventories accumulate. We're seeing shipping times and shipping costs fall rather dramatically. to pre-pandemic levels. And so on the good side, we're already seeing disinflation for a lot of different items. And I think that's important insofar as it will eventually feed into both CPI, the headline number and the core. And as you mentioned earlier, in residential real estate, places like Los Angeles, even, prices are beginning to come down. And that's true in major

metropolitan areas. Rents are lagging, but we'll eventually get there and start to put down to pressure on CPI as well. So do you think that the Fed is paying sufficient attention? to these indicators that you cite, which are more present and forward-looking, than the numbers that are in the data that, for example, that came out yesterday or before, which are backward-looking. Right. No, 100%, I think they're looking in the wrong direction. And so far as, you know, you look at the New York Federal Reserve's own, you know,

a global supply chain pressure index. That has turned lower. Again, with respect to a lot of having to do with global trade, with respect to shipping times, container costs, which last year were, you know, $20,000. This year, they're $2,300. And so we're seeing, you know, all that supply chain disruption evaporate retailers, as we've discussed in the past, accumulating large inventories and are going to have to discount prices going forward. And, you know, even commodities, look at gasoline and oil. You know, after that brief OPEC pop that we had a couple weeks ago, we're back down $3 today and falling. And so gasoline's going

to start coming down again. And so I really think that the market, whether it's inflation expectations away from the University of Michigan, which have ticked up a bit, but are still very well anchored around 2.3, 2.4 percent when you look at Treasury break-evens and the like. The market's telling us inflation's coming down. Yeah, okay, but Ron, where we saw the problem is with services inflation and wage inflation. How do you think that you start to see a disinflation in those areas? Well, Lizanne Saunders of Charles Schwab put up an interesting chart just a little while ago, and it showed that wage inflation is beginning to roll over as well. And so when you see that, which is what the Fed's trying to break along with the services numbers,

services numbers will have to come down if the economy slows. There's just no way you can maintain a higher cost of services if the economy were to slow significantly. Or even in the words of Jamie Diamond, we slip into recession. And do you think that it kind of propels automation here? Because I've read this that in like, I don't know, the top jobs in every state, state, two of the three are drivers and cashiers, both of which have the potential to have automation come in and be disruptors in those sectors. Well, all cashiers already. Yeah.

We call me Donald's. Right. Yeah. Donald has robots making fries, or at least is experimenting with that. Amazon has a robot that can load a hundred thousand packages on a conveyor belt per hour. So, you know, it's funny, I did talk to Kathy Wood at an investor conference a couple days ago. She's on the deflation side of this with innovation.

on the disinflation side. But I do think with the artificial intelligence, machine learning, robotics, natural language processing, all of those things over the next year or two are going to come at the economy faster than people realize and will help at least go some way in solving some of the wage issue that we have today. I thought it was so interesting yesterday coming off of, I know you and I were both in Las Vegas, but at separate conferences, to watch the speculation over the markets and why we were seeing the sort of rash turnaround. What's your thought about this? Like, are we just, we need to buckle up and get ready for more of that? Yeah, probably. I mean, and it's interesting. Larry Summers with who I've openly disagreed

on this inflation issue and on Fed policy is now talking very openly about emerging market bonds breaking and that developed nations are not doing enough to ward off a 1997 or 1998 style emerging market debt crisis. If that's true, and if the Fed's getting closer to raising rates to four and a half or five percent, something will break and we'll see increased volatility. So, you know, it's interesting that Larry's been pushing for higher rates, but now also warning of the consequences of going too far too fast because some bond markets, what Japanese government bonds 10 years haven't traded for like five days and the illiquidity in the UK, and we're seeing this also in African bond markets.

You know, a mistake there and, you know, the Fed has to stop. Ron Insana. In Sana' conferences in Las Vegas? Conferences? Oh, did I just, I just gave fodder to the... She was at a gaming conference. I was at a financial conference. Guess which one was more fun?

Well, no, I had a great time, actually. I mean, I lost a couple hundred, but... I walked away a winner. I tripled my money. Did you want? In Santa. But I'm in the game... Listen, I cover gambling as a sector.

I should know something about it. I'll be in Vegas next week again. You will? Okay. Let's talk. We digress. Speaking of falling prices, Pippa Stevens found some pretty dramatic declines in food commodities. Key input costs for restaurants.

Pippa, what are you seeing? That's right, Contessa. Well, this week's CPI and PPI readings both showed that food costs remain stubbornly high. If we take a step back and look both longer term and on a more granular level, you can see that commodity costs specifically are trending lower. Now, according to data from Bernstein, during the third quarter prices for beef and pork fell year over year. Coffee, milk, wheat, and cheese do remain elevated, but they are starting to come down. Now, this is notable because surging input costs have been a major headwind

for restaurant companies, and they've passed along some of that to consumers in the form of higher menu prices. Now, Domino said yesterday during its earnings report that it expects food costs to rise between 13% and 15% this year. But that's actually somewhat good news. As Kalanowski, research noted, those estimates didn't go up compared to the second quarter, meaning during a tough stretch, guys, the outlook is not getting worse. So, Pip, I've got to ask your questions. We look at this beautiful, beautiful graph you have here. The prices of beef and pork are actually lower than they were a year ago, year over year

price change. But the others, it is merely that the rate of price gain is slower than it was a year ago. But by any standard, when you are up 20% year over year on coffee, 19% year over year on wheat, 47% on milk. Over quarters. Blah, blah, blah, blah, blah, blah. Yeah, the quarters. You got higher quarter to quarter. Yeah, no, absolutely.

And you can see they're starting to trend lower, but there's no, there's no doubt that they're still high. However, any relief here. And rise it. But any relief, Tyler, is really good for the restaurant industry because 33 cents on every dollar in sales is thanks to these impact. costs and beef and pork are a major source of inputs for restaurants. So even while some of those other ones are still high, they are starting to come down. And so if we look a little bit, you know, less on the month's month, more quarter to quarter. But what's coming down is the rate of growth in prices, the rate of upward change in prices. I agree. That's better. 20% price gain in coffee

is better than a 49% price gain or an 82% price gain. But it's not as though, my coffee's getting cheaper, it's still getting more expensive. Which is why I keep talking about people turning to store brands, because those brand names are getting expensive. Yeah, yeah. Pippa, thank you. Food for thought. Food for thought.

We like that. Pippa, thank you. We're watching the market. Who isn't watching the market? The Dow. Now at Session Lowe, it says, right here. Let me look. 385, down 1.28%. Plus, we're going to talk about housing paralysis. Buyers panicking, sellers not budging. We're going to talk to an L.A. Realtor.

Who says this market is like nothing she's ever seen before. Plus, retail sales stalled last month, but there are three stocks that could be profitable short-term trades. We'll tell you which they are later on power. We'll be right back. Welcome back to Power Launch, everybody. The housing market in L.A. changing fast two months ago as part of our powerhouse road trip. A realtor told us that deals were starting to slow out there. Today, she says they're at a near standstill as mortgage rates rise and buyers panic.

Let's bring in Stephanie Vitaco, broker-associate with Equity Union in Los Angeles and Southern California. Stephanie, welcome. Good to have you with us. Is what's happening here that buyers are afraid that prices are going to come down, down, down, so they don't want to put in at $1.3 million on a property that's going to be $1.2 or $1.1 in a few months. And sellers just haven't gotten the message yet that they've got to ask for lower bids. So absolutely. So what's happening is the sellers are starting to get the message, but they're definitely resistant because, of course, they saw their neighbors get these incredibly high prices just a few months ago.

But what's happened in this shift, and I've been doing this for well over 25 years here, and I've never seen it happen quite so fast. So a loan in March for a million dollars would have cost a buyer around $4,100 a month. That same loan is now at about $6,500 a month. and its buyer, the affordability just can't keep up. So where a year ago we had prices just climbing, climbing, interest rates were so low so the buyers weren't afraid to spend. But what's really interesting is people found it psychologically easier to overpay by several hundred thousand dollars,

then right now they can get a much better value as prices are shifting. So we've definitely seen about 10 to 20 percent decline since March. And I would say that, you know, there's no bell that goes off at the top or at the bottom. But I would definitely say that March would have probably been the peak if we were to try to. So prices in your market are off 20% since March? So I have a very specific property. And this I could give you stories all day long. But yes, a property where in March it would have sold for a million two all day long.

We listed it at a million two because they were a little late in getting to the market and they wanted to try. we adjusted it to a million one 95, a million one, then we dropped it down to a million 150. We got it to $999 and sold it for $980. So, yeah, that's 20%. Our prices, going back to our previous segment where we were looking at a change in the rate of change of prices, are prices higher, despite this decline, are they higher than they, are the transaction prices higher on average than they were a year ago still? are they not? Yes, we are probably back to sometime in maybe first or second quarter of 2021. It's hard to say exactly where. So the good news is, and that's what everybody forgets. The good news is our prices are still higher than where they were. They're just not as high as that crescendo that we

experience. It's still unaffordable. What do you think breaks the, what breaks the logjam here? Is it, is it sellers becoming more reasonable about the market that is, not the market that was, or the market that they're hoping will happen? Or is it that mortgage rates? I mean, we've sat at low mortgage rates for so long that, I mean, people in the last 10 years, if you bought your first home, it's all you've ever known is rates below 4%. Absolutely. So, and that is part of the real estate gridlock. So just about anybody who's purchased since 2012-ish, they're somewhere in the 2.5 to 4% range. So that's a very hard thing to give up. So what we're seeing now is more mandatory sellers than discretionary sellers. A year ago, people, everybody was like, let's get a bigger

house. It will cost, actually in many cases, it cost them the same or less because they were trading out of a four and a half or five percent interest rate to a more expensive home, but at two and three quarter percent. So it was worth the shift. So now those people are like, you know what, we're good where we are, we're going to stay put, but the people who need to sell or really want to sell are making the move. And another thing that we're doing in our market, and we haven't done this in years, but I'm asking every single one of my clients that has a low interest rate, is your loan assumable? Everybody looks at me and says, what? We haven't done assumable since the 90s. So, but if you have a, I have a client right now who has a two and three

quarter 30 year fixed loan. So what we'll do is we'll have the buyer, assume that loan, they'll have to get a small second for the difference because the price is too great. The seller's equity is still too great for the difference. But it's about getting creative. I've also started having where we're factoring buying points. So I'll have my seller buy points. And when I say seller, it gets financed into the loan, but it becomes part of the overall package. So it brings the payment back down so you can get maybe a 5%. Really creative for the realtors, for the buyers and sellers. You've got to wonder whether the banks, you know, facing this are like, ah, not that, anything but that.

Stephanie Vitaco, thank you for joining us. We appreciate that. Coming up here on Power Lunch, east of Wall Street, investors closely watching the results of China's National Party Congress will lay out what you need to know and why you need to know it. Plus, it's been a wild week for stocks. The SPY closing up 2% after starting the session down 2%. For only the fifth time in the history of the ETF will trade the biggest movers into Today's three stock lunch and stocks are now trading near session lows. Look at this. The Dow is off more than 300 points, almost 400 points as we head toward the closing belt.

All right. Welcome back to Power Lunch, everybody. We got stocks right now at session lows pressing in on a decline of 400 points on the Dow. The S&P 500 off more than 2% or 78 points. And NASDAQ off 2 and 2 thirds percent off 283 points at 103.3. 366. As has been the case so often, it is the NASDAQ, which is leading the overall markets lower. The Dow industrials, relatively speaking, the one with the least steep declines. There are some Dow laggards, American Express, Apple, Chevron, among the worst performers on the Dow at this hour. And Dow thrown in for good or bad measure, as the case may be. Let's go to Frank Holland now for the CNBC News Update. Frank. Hey, Tyler, here's your CNBC News Update for this hour. the federal policy that prevents the deportation of immigrants who came to the U.S. as children,

that will continue at least temporarily. A judge ruled the current version of the DACA program can stay in place with the limitations that he set. Another ruling on the program last week drew protesters in Washington. And after six months in space, four NASA astronauts are coming back to Earth. Their SpaceX capsule has undocked from the International Space Station and is expected to splash down off the coast of Florida later this afternoon. And Durango, Colorado, a very large, One welcome guest was found under the deck of a house.

It's a bear, as you can see, weighing as much as 400 pounds. It took a tranquilizer dart and five wildlife officers to get that bear from under the house. The bear will be relocated to an area with a lot of food and few people or hunters. And the actor who played Hagrid in all eight Harry Potter movies has passed away.

Robbie Coltrane also played a crime-solving psychologist in a 1990s TV series and a villain in two James Vaughn films. Coltrane was 72 years old. He was in a golden eye and the world is not enough. Really good actor. Back over to you. Oh, that's sad news. All right, Frank, thank you. A head on Power Lunch.

Putting together a retail shopping list, the group setting a low bar as of late with key names like Nike, missing the mark on earnings. But our next guest has a list of names within the group to watch in the months ahead. We will be right back with that. All right, coming back now, we have fewer than 90 minutes left in the trading day. Let's get you caught up on markets, stocks and bonds and commodities. And the retailers that could weather the headwinds,

facing that industry. But first, as we hover around session lows now, Christina, parts of nevertheless, with more on that. Christina. Well, let's talk about yesterday's short-term oversold rally that's not repeating itself today with hotter inflation dynamics. Clearly a big theme. The NASDAQ, we are, as we head into the session, it's actually dropping even more, down 2.67% on track to end the week in the red. You've got bellwethers like Apple, Amazon, Microsoft, all lower and having the biggest point impact on the NASDAQ. Overall, though, the tech sector is dealing with the fallout related to new U.S. rules on chipmakers doing business in China.

This could amount to the biggest shift in U.S. policy towards shipping technology to China. Since the 1990s, that's why it has a trickle effect across all sectors or all tech sectors. And that's why Chinese tech names like Baidu, Pin Duo, continue to sell off today. You can see Baidu down over 5%. The K-Web Chinese ETF suffering its longest losing streak since last April. And then you've got another hurdle for high growth stocks, the 10-year yield that we did see climate, above 4% drop. Oh, there it is again, above 4%. Higher yields, as we know, can hurt tech firms with high valuations based on future profits.

And right now, I've been going back and forth with this. Only four names trading positive on the NASDAQ 100, like Kraft, Comcast, software firm, Splunk. Just some of the few. But in the coming weeks, we'll get a flood of new earnings reports, and investors will be looking for more evidence on whether a bottom is here. All right. I know a lot of fingers are crossed for that. Christina, thank you. Let's get a check on bonds.

We're heading into the weekend. And Christina just mentioned now the 10-year hitting above 4%. It's kind of hovering there, Rick Santelli. Yes, it is. Indeed, 4% has been kind of a wild spot on the whole long end of the curve. But let's start with that two-year. The two-year right now hovering right around 4.5% is up about a handful on the day and up nearly 20 basis points on the week. But it is starting to ease off a bit, and there's very little doubt the higher rates

have been one of the reasons that the stock market has turned red. As they start to dip, maybe that will change a bit going into the final hours. As you look at a 10-year, you can see exactly what Contest is talking about. Several times this week, once at the end of September, we've toyed with 4% on an intraday basis. But the truth is, we haven't closed above 4% since October of 2008. So we want to pay close attention. It's a very significant level technically. And 4% comes into play on a 30-year bond.

Look at its week to date chart. Yes, we did dabble intraday over 4%. We touched 401, having closed above that level in a third year since 2011. And finally, it's all about list trusts and her government and her tax plan that was put forth on the 23rd of September. And as you look at the Gilt chart from the closed, the session before that on the 22nd, you could see with the Bank of England ending its buyback program, the Gilt ends up about 85 basis points higher. It was right around 3.5%. Today, it's right around 4.35%, as you can see on the chart.

But here's an interesting fact. Here's the same time frame for the pound versus the dollar. And even though the pound is a bit lower, it was around 112.61 on the 22nd of September. It actually did the best on the week thus far, up about three quarters of 1% versus the dollar index, up about half 1% against the majors, better than the euro and better than the dollar yen. Tessa, back to you. Rick Santelli, thank you for that. And oil sliding.

Pippa is back with us now at the commodity desk. Pippet, give us a sense of what's happening. Yeah, Contessa, commodity prices are falling across the board today. For oil specifically, we had three major demand forecasters slash their outlook. That was OPEC, the EIA, and the IEA, all slashing their demand outlooks this week based on macro headwinds. And that coincides with these new lockdowns in China. So there are many bearish headwinds this week for oil. WTI is down 4% at 8564, with Brent crude down 3% at 91.72.

And natural gas is also in focus here, posting an eighth straight week of declines for the first time since 2001. And, you know, we've seen record injections into storage in the past two weeks. And right now we're in shoulder season, so it's a seasonly weak demand period for natural gas, we have moderate fall temperatures. These declines are dragging on energy stocks, which is the worst S&P group today. Nat gas names Cotera and EQT are leading those declines. Contessa? For that, retail sales stalled out last month as consumers felt the pinch of higher rates and inflation.

But despite the headwinds facing the sector, our next guest says there is a short-term trading opportunity in a few names. Jonathan Komp is senior research analyst at Baird. Listen, we are hearing alarm bells about how much. much inventory these stores have in stock and whether consumers are going into the holiday shopping season with less expectation of buying, why are you sort of bullish on getting in right now? Yeah, thanks for having me, Contessa. You know, as a fundamentally driven analyst projecting the next few quarters is as challenging as ever. You know, there's a lot of supply risk. There's risks

of demand shocks, as you mentioned. But as you know, stocks in the market overall, both fundamentals and sentiment. And in our note today, we highlighted five points to investors, why we think sentiment for the group really reflects a lot of the risks that we see. And when you look at the stock price declines, we've already seen for this group down more than 50% year to date and twice the market's decline.

When you look at a couple of the bellwethers like Nike already having lowered the bar for the group, in our opinion, you know, we think a lot of the fundamental risks may be in the stocks here. And it certainly requires a certain risk tolerance. tolerates. We expect a lot of volatility to continue. But in our view, we see some opportunities emerging more on a three to six month basis. You like a couple of shoe companies, not including Nike, which is, of course, way much more than a shoe company, but Decker's and Crocs, which are

largely in that area. Yeah, that's right. So to be clear, we do like Nike, maybe not as much in the short term as the three we highlighted today, given some of the challenges that brand has in China. But the three we highlighted, all. have some fundamentals that some factor of fundamentals that we think can help weather the storm and or are structurally better business models that comparing over the last few years we also think valuation for the three we highlighted are quite compelling Decker's is among the highest quality portfolio brands in our coverage it has more than twenty five dollars a share and cash on

the balance sheet and we think is is not getting credit for the growth potential of the combined portfolio of both the UG brand and the Hoka runs specialty brand. So that's one we like a lot here as a as a quality name. Crocs is certainly more controversial. The valuation is much, much lower here. We think the market is pricing in as much as a 20 to 30 percent cut to Crox sales and much lower profitability and also not giving credit for the newest brand they acquired late last year, the Hey Dude brand. And frankly, all of the market indications seem to be holding up very well for both brands. And we think the the expectations just are overblown here to the downside.

And your third pick, which we didn't mention yet, but VF Corp, which has Vans and North Face and Dickies, a lot of outdoor. But the Dicky's part of that, too, with the exposure to the workforce, right? Yeah, that's right. VF Corp is a portfolio of 12 brands. We think the portfolio is well positioned and certainly much better positioned than in the past. Virtually all of the brands except vans are on a strong trajectory, including Dickies. And we think the market is overly concentrated right now on the Vans brand. We just met with management several weeks ago, spent a lot of time hearing about the new strategies, meeting the team at Vans. We think a fundamental turnaround there is certainly possible over the next few quarters. And the stock is trading

at valuation levels on a forward 12-month basis that really rival back to 2008 and 2009 levels. You throw in a dividend yield that's approaching 7%. And we think the sediment here is too low. And really, you know, the stock is a consensus short idea here that I think over the next few quarters, you know, there's their strong potential for sediment to improve from the low levels here. And VF Corp just turned positive as you were talking. Jonathan Kahn, thank you very much. Appreciate that. All righty, coming up, as we have seen, Chinese tech stocks continue to lag the market. They failed to rally after yesterday's big gains. This is China's Communist Party Congress comes together for its rare and important meeting. We will give you the latest on that next. And stocks losing steam as we head into the close.

We got about an hour and a quarter left. The Dow down nearly 400 points. China holding its Communist Party National Congress this weekend. President Xi expected to take another term. And while that sounds like a purely political event, there are some investment opportunities and implications. Simomodi looks now at how your money might be impacted. Sima.

Tyler, investors want to know if President, Xi Jinping's anti-corruption campaign and cracked down on tech that has challenged its biggest companies and stopped the $34 billion ant group from going public if all of that will continue. It's clearly had an impact on the market. K-Web China ETF down 58% from its recent high. Now, the 69-year-old leader has been in office since 2012 and is expected to be granted a third five-year term. This Sunday, she will deliver a speech where he'll outline the country's broader political goals.

It comes just one week after the U.S. unveiled sweeping restrictions on China's semiconductor industry. Experts say he could address the decision indirectly, calling on the country and its manufacturers to become more self-sufficient, less reliant on the United States. Beyond his speech, Macquarie strategist Larry Hu wants to see how leaders strike a balance between security and development.

Given the sharp deceleration in the economy, will Beijing make growth a bigger priority? we do get third quarter GDP results from China on Tuesday, analysts estimating a 3.5% rise, which is well below the target set out by leadership earlier this year. So how might this weekend's events or this week's events change attitudes towards emerging markets investments overall? Well, Tyler, we've seen accelerating capital outflows out of emerging markets

over the past month, much of that having to do with a stronger dollar, a tougher economic backdrop. if the speech and this meeting over the next week does not prioritize growth. I think that could give investors a little bit more trepidation when looking at these markets. Specifically for the MSCI emerging market ETF, China really matters. It makes up 32 percent of that ETF. So what China does, its outlook for growth, that has an impact on the broader emerging market trade. All right, Timom Modi, thank you very much.

All right, still to come. We're going with the swing of things here. Our markets took a volatile turn this week, creating plenty of new leaders and lagers. We're going to trade some of them in today's three stock lunch. Right now, you're seeing the markets down. Look at the Dow Jones Industrials off by 385 points. Just hit the 400 mark just short a few minutes ago. We'll be right back.

While stocks are falling as we head into the close in this wrap-up for what has been a wild week for stocks, really led to some outsized gains and losses, Moderna and Walgreens, two of the best performing stocks this week and Lamb Research, one of the worst. Let's trade those names with Craig Johnson, Chief Market Technician at Piper Sandler. Okay, it's great to see you today. First up, we have Moderna up 13% this week. What's your take? Yeah, our take on this contest is that the shares have been essentially consolidating for the better

part of about six to nine months, actually the February-March timeframe. Really good support at the 117 level. I know the shares are off 47% year-day, 75% off of their all-time highs. But there are some fundamental things there that look constructive. We had the exercise of that $250 million milestone. And technically, the stock is just not breaking through that support at 117. So I'd rather be a buyer here starting to nibble at the shares. And I think Ted Tenthoff at our firm has got this right.

And with a $214 price objective, I think the risk reward looks pretty good. Let's move on to Walgreens Boots Alliance up 10% on the week or it was when that note was written. Yeah. Yeah, I mean, Tyler, so you look at this and the stock is still by all means in a downtrend, a well-defined downtrend, going all the way back into the early part of 2022. That said, the stock has been very oversold. And if you look some of the shorter term momentum metrics like RSI, you can see it got oversold.

It's starting to show a bit of a divergence and improving. I think you got to trade here in this one, Tyler, back up to the downtrend resistance line and the 50-day moving average. And bottom line is we'd be a buyer here for at least a relief rally back toward $35. All right. And then our final name on the list, Lamb Research, falling 14% this week. What's your take, Craig? I think this is a buyer beware stock at this point in time. If you look at the longer term kind of weekly chart, it is a distributional top that has been made here in Lamb Research.

You clearly have got some fresh challenges with the U.S. putting new curbs on China technology, and you're also seeing disappointing earnings coming through. Really is still kind of concerns that there's going to be further downside here in the semiconductor space. So as I look at this name, it's sort of a poor risk reward at this point in time. Any sort of break below this 2.95 level is going to leave support at 225 contest. So this is one I got to pan at this point in time and wait to try to find some identifiable. support because one doesn't win trying to catch the falling knife. Let me ask you about stock markets today here, Craig.

You've got the Dow Jones, the Dow actually sort of falling in this range of 380 to 400, 410 or so. What's happening with the markets? What do you think we're looking at starting next week? I look at a market like this and I say technicians are even more important today than they ever happen. If you look at yesterday's price action, we hit a 50% of Fibonacci retracement level. from the recent lows. And then we traded right up to the June closing lows of yesterday's

price action. Today looks like an inside day to start a backing and filling right now. From my perspective, this market is so incredibly oversold. It is due for a relief rally. That being said, that doesn't mean that it's all clear. It just means that we're probably going to get a pretty good rally that could take us back up toward 3,900, maybe a little bit more. And I think that'll happen between here and year end. That said, it's still a downtrend. You still got to be careful, and it's still sort of a buyer's beware market. Craig Johnson, thank you for joining us today from Piper Sandler, the chief market technician with us today. We've got tips and tackles up next. We've got two other stories we're watching. We'll hope to

bring those to you, but number one, of course, we're going to watch the market for you as we round up to three o'clock Eastern time with one hour of trade left to go. Okay, folks, we are welcome back, by the way. We're watching another big swing for stocks. It's been that kind of week. I mean, an amazing week, really. The Dow had been up 390 points very early in the session. But a session low was short time ago as the stock market barometer was down 424 points, Contessa, now down 376, a point and a quarter. And so we have one hour and one minute left to go and what's spend this wild week. The Dow on pace for a gain, the S&P 500 and the NASDAQ in negative territory. If you look at the whole week, you have oil

falling today. Energy is the weakest S&P 500 sector. EQT, Cotera and Pioneer among the big decliners there. You can see them now. Look at EQT down 6%. So is Cotera. Pioneer Natural off almost the same. And things getting even worse today for a couple once hot stocks, which have just fallen out of favor. Beyond meat down 8 percent. Peloton down 15 percent. Serious concerns about the future for both of these companies. And remember, when we're looking at the markets as a whole, a lot of our experts are telling us now, Tyler, you have to look for the strong fundamentals

and the leadership you believe in for these companies. How many more 15% declines can Peloton take or beyond meat? I mean, at some point, you get really close to equity gone. You have to think there's a lot of investors right now who are looking forward to taking a breather this weekend and maybe disconnecting. What a week we've had, and it continues now, as we finish the week up and round into the, close. Thanks for watching Power Lunch.