Power Lunch - Stocks Soar After Jobs Report, The Boss Comes Back and Energy’s Encore 1/6/23

Episode Date: January 6, 2023

Hopes that inflation might be peaking sends stocks rallying. And “Boomerang CEOs.” Executives coming back to the companies they used to run. Is that good or bad for those companies? Plus energy crushed the broader markets in 2022, can the same thing really happen again? Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, welcome everybody to Power and Launch. I'm Tyler Matheson. Kelly will rejoin us in just a second. Here's what's ahead. Welcome back to the boss. Bob Eiger returned to Disney. Now Vince McMahon is coming back to crack some heads at WWE. Katrina Lake coming back to Stitch Fix is three a trend. And could we see even more old faces return to their old places as CEO? Plus energy, a big winner, of course, in 2022. The sector gaining 60% while the S&P 500, Well, it lost 20%. So what can energy do for an encore? Should you ride those winners or look for opportunity, Kelly, elsewhere? All right, Tyler, thanks. Hi, everybody. The markets are seeing a nice jump, but kind of for all the wrong reasons. Dow's up 580 to 87, about 100 points off the highs.

All of this coming after weaker wage growth in the jobs report, a very disappointing ISM services report and a deeply inverted yield curve three-month tenure. Let's get to Bob Bassani for more at the New York Stock Exchange. Bob? And the important thing is six to one advancing the declining stocks. That's pretty good. We're right at the highs for the day. Two percent right across the board Dow, S&P, NASDAQ. And what's happening here today is the soft landing crowd is kind of back, the people who think we can have still moderating jobs, still strong, but moderating. And wages still okay up, but also moderating wage inflation, that is. So that's the soft landing crowd. And you see that in the growth stuff. Remember, it's been a rough week for some of these big technology stocks that are out there. Some of the big names today, all moving to the upside. And yet, you know, Alphabet's been down this week, generally.

Microsoft's down 6% still, even with a nice bounce today. Amazon was a 52-week low, but it too is bouncing today. We're also seeing a nice bounce in semiconductor stocks. It's been very rough week for some of these big names. And Vidi has been very choppy this week. But everything, including the semiconductor capital equipment companies like Lamb and KLA, all to the upside. Elsewhere, you want to look at global growth stuff, and materials is a good way to look at that. That's a good risk on play, and all the big material names, Selenese, Sealedair,

Freeport, Mosaic, all are having very, very big days. These are leaders in the S&P 500. You don't see that often with materials. Small groups of stocks are hitting new highs. It's been a great week for Caterpillar. That's a consistent new high recently, and so has Merck consistently been hitting a new high. Retail is generally not doing that well, but a very small group, the classic discounters, TJX and raw stores also hitting 52-week high. So where are we? We're up 0.6% this week, actually pretty good, considering how choppy and difficult it's been. So we're breaking out of this trading range we've been in the last three weeks or so,

3,800 to 3860, excuse me. And you can see we're just a little bit above that right now, right at the highs for the day. Not bad start to the year, considering how choppy and difficult it was earlier in the week. All right, Bob. Thank you. Our Bob Bassani. But what's lurking around the corner for clues about that? Let's go to the bond market.

Rick Santelli. Rick? Yes, a historic day in the Treasury complex. Look at this chart. This is a week today to three-month versus 10-year spread. And remember, it closed the end of the year at minus 37. it came in on Tuesday with a high of minus 46, and it's now trading at minus 105.

Minus 105. Now, in CNBC, we go back to 1989 on this spread, and you can see there is nothing in the neighborhood of minus 105. A little history lesson here. The 26-month bill changed in how they auctioned it in 1982. It went from price to yield. So I was able to go back from the difference between 89. and 82, I don't see any yields or any inversions that are close to this.

And if we look at what's going on, the catalyst to all this was twofold. First of all, if you look at the early morning data, when we saw the average hourly earnings month over a month, only up three-tenths of one percent. And last time they were up six-tenths, revised it down four-tenths. That was part A. Part B was even more exciting. Let's look at this IM-SM chart. You know, the ISM number of 49.6 of services, most important aspect everybody at the Fed's looking at,

well, it dipped under 50 of 49.6, which is the lowest since May of 2020, which I pointed out. But if you take COVID out, it is the lowest level since the end of 2009, and that's what traders are really talking about. And if you look at 10-year in general, we closed last week at 388, the last trading day of the year. We're down over 30 basis points, so now we're over 1% below three-month T-bill rates and the dollar index, which was off to a great start for 23. Well, it gave up a lot of ground as these interest rates tanked. Back to you, Tyler. All right, Rick Santelli, thank you very much. And we move on.

More and more in today's corporate world, investors find themselves asking a new question over and over. Who's the boss? Well, tough times call for tough calls and maybe sometimes for old, not necessarily. new faces. First, Vince McMahon, returning to the ring, the WWE founder, electing himself, because he's a controlling shareholder, executive chairman of the board just months after retiring in order to deal with the aftermath of a scandal, and potentially now pursuing a sale of the company. The CEO of Stitch Fix, stepping down, announcing job cuts of up to 20 percent of its salaried workforce. The company is turning back to its founder, Katrina Lake, to fill the role

effective immediately. And we know all too well about Bob Iger's bold return to Disney less than a year after completely stepping away from that company. Now some rumors and theories even circulating around Amazon and founder Jeff Bezos potentially returning as that stock has struggled. Here to discuss this growing trend, if we can call it that in corporate America. Susie Welsh, leadership professor at NYU's Stern School of Business and advisor to the Brunswick Group. and America's Reed is a professor at the University of Pennsylvania's Wharton School of Business as well as a CNBC contributor. Welcome to both of you. Susie. Let me begin by asking you, what does the history tell us about the success of old CEOs who come back as new CEOs? Does it usually work or not?

Well, there are spectacular cases of success, and we all know what they are. There's Steve Jobs. There's Howard Shultz. There's a few other cases where, everybody points to them. But actually, in 2020, the Sloan Management Review published some very good research by some professors out of actually UNC. And they looked at 167 cases of boomerang CEOs, as they're called. And the numbers actually would show you that it doesn't really work all that well. I mean, that in most of the cases, in the vast majority of the cases, that stocks underperform when CEOs come back. So there are these spectacular cases. And there are cases where CEOs really want to protect their legacy and they go back and that's the impetus or the board calls them back for that

reason. But if you just look at the sheer research, it's a, it's not as good a picture. In fact, it's a pretty negative picture. Americus, does your research, do your views agree with what Susie just cited? In other words, for every Steve Jobs or Howard Schultz, there may be three or four that don't work out? I think that's correct, Tyler, because what we see is we see a self-selection sort of approach. that where we spent a lot of time focusing on the success cases, and we don't really hear a lot about those failures that Susie's talking about. I would also say that what we're seeing is very much this idea of a new sort of world where generational cohorts are demanding that

CEOs sort of build their own brands and come out and talk about purpose and what they stand for. So a big part of this process, Tyler, is really having these CEOs step back in to the roles because they have a brand, a strong brand to be able to give investor confidence and to be able to really help push that comeback story. Whether or not that comeback story is going to be successful will depend on a lot of different factors like Susie is saying. And Susie, it's interesting in the case of WWE to look at the stock pop, which is because Vince McMahon also signaled, look, I want to be a decision maker at a time of what could be a lot of flux for media in streaming. I mean, There's reports about even our parent company being involved for this asset or other rivals.

And the entire space feels wide open right now for a potential wave of M&A. So I don't know if that's a different situation where he feels as though he is uniquely the person to steer that, you know, that epoch. Well, this is the founder syndrome, right? And I do think that he feels uniquely the way that way. I think Howard Schultz felt uniquely that way that their legacy is all wrapped up in this. they created it, they have the DNA of the company in their bones, and they are the only ones who can answer all the questions that need to be answered. It does kind of beg the question about whether or not these companies are bigger than their CEOs. I mean, if you buy into this

that only this person can come back and save us at this critical time, you know, the way Steve Jobs did, right? Maybe Steve Jobs was the only person who could do what he did, and maybe Vince is is the only person who can do what is needed right now. But I mean, I think in the, I remember there were as a period where people were asking whether or not Jack, my late husband would go back to GE. And when I remember David Dachloff asked him this question at a function we're at. And Jack said, look, GE is just so much bigger than me, so much bigger. You know, it was bigger than the CEO. And there's great people there. And that was his argument for just trying to put that to sleep right away. But there is this, you know, as America's was saying, there is this notion that these are the, you know, you are the brand.

You are the company. And I'm, you know, whether that's. healthy, that's a question for the board to still work on. Susie, as you often do, you have the courage to ask yourself the question that I was about to ask you, because your husband, your late husband, certainly would have been in a conversation should he return to GE during its era there where it was not doing so. Well, Americas, let me turn back to you and ask the question, do these situations where the old person comes back, do they work better when that old person coming back is the founder? And we extrapolate?

Yeah, that's a great question, Tyler. I think that one would have an intuitive hypothesis that the founder, the fact that the founder steps back in, so if you take the example of stick fix, you know, the founder created this. So Katrina Lake has a brand, a very powerful brain. She started the company in 2011 that while she was doing her Harvard NBA, I believe. And so she has, as what Susie's saying, the kind of understanding of how this thing started and has that understanding of the deep DNA that's potentially important with respect to bringing back success when things begin to plateau. So, you know, even though it's a bit of a difficult stance here, because Katrina is stepping into the notion of having to immediately cut 20% of the jobs and maybe shut down a distribution center in Salt Lake City, she's the one to do that because it is her company.

And so she can do these kinds of, make these kinds of difficult decisions because she is an authentic founder. And so stepping in, even though her tenure will only be six months is my understanding, it's a way to kind of reassure that this authentic individual who is the founder will always want to do what's in the best interest of the company. That's very well said. Let me pivot while you're both here and ask about this new issue, if we want to call it that. The FTC, of course, now trying to bar companies from allowing these non-competeenance and labor contracts. We had at Lena Con this morning, the FTC chairwoman, about this proposal on Squawk Box. I'll be reminded of what she said about this.

When you're talking about executives and engineers and tech workers, for example, or those in finance, what we've seen is that these types of restrictions are basically depriving the market of new ideas and of innovation. Because people are locked in. They can't go start even a competing business. I am curious, you know, Susie, wow, I see you shaking your head. What do you think about this? You know, it's funny. I sort of wear two hats here, right?

Because when I'm at NYU Stern teaching my students, I am advocating for them and they're going to get jobs. And then I'm also on boards. And so I'm in the role of an employer. And this makes it so, I mean, I can't help it. I kind of hate this rule because I'm thinking about it through my employer's eyes. Right now, the balance of power is shifted from the employer to the employee. We're going through a sea change and important change in the American economy. And maybe that's a good thing.

Maybe it's long overdue, okay? maybe the balance was out of whack. But it's very hard to be an employer right now. It's very hard to find good employees. It's very hard to hold on to them. And this, if the non-competees go, it makes it so much harder because you have people, great people, you pour a lot into them, you invest in them. And then they can walk out the door and just take everything you put into them

and go start their own company and you're not able to protect yourself at all. Can we make it any harder to be an employer? Now, I get it because I have kids in the workforce and I have students going into the workforce and I sort of understand that they deserve to have some kind of leverage and they are getting more and more leverage. Maybe that's a great thing. But as an employer, just to be honest, hate this very much. All right, Susie, Americas, thank you very much.

We have some news that we need to get to. Thank you both very much. Provocative conversation. Yeah, we have some breaking news on biogen. Bet you can guess it. I think the stocks halted Meg Terrell. What did they decide? Yeah, Kelly, the FDA approving the second new Alzheimer's drug in two years from ASEI and

and biogen. The brand name for this drug is called Lekembe. The drug name we've been calling it is lachanamab. Biogen has been halted on this news. We'll expect to wait to see when it opens. We'd heard from RBC. The stock could potentially go above 300 from about 281 right now. We'll see if that indeed happens. In the approval, Billy Dunn, who's the director of the Office of Neuroscience at the FDA, saying that, quote, this treatment option is the latest therapy to target and affect the underlying disease process of Alzheimer's instead of only treating the symptoms of the disease. Guys, we know this has been a really controversial class. The first drug was priced very high, ended up being a total commercial flop because there were debates about how well it worked.

This one has more clear data. We're going to wait to hear from ASI where they're going to price this. That'll be the next big question. And then, of course, after that, whether the Centers for Medicare and Medicaid services will pay for it because they declined to pay for the first one. And that was a decision that was for the entire class of Alzheimer's drugs, guys. Back over you. Right. Exactly. A huge decision, hugely impactful. So this is only even part of that story. Meg for now, thank you, Meg Terrell. And when Biogen reopens for trading, we will let everybody know. Coming up, stocks rising today on hopes inflation may be peaking. Materials, a big winner. Steel and paint, by the way, as well. Plus, energy drastically outperformed the broader markets

last year. It rallied 60%. So what can it possibly do for an encore? We'll find that. out. Welcome to Power Lunch. Sure. Welcome back. I should say, markets are rocketing higher today after the jobs report. Right now, while you see the Dow is up 645 points, so that's about 2%. Let's bring in Steve Leaseman now. Markets, Steve, seeing signs of inflation slowing in this report and some of the wage gains pairing back a little bit. Yeah, you know, Tyler, while the market rally seems key to the economic data and signs of slowing inflation and the economy. Really, Fed officials clung essentially to their really hawkish takes on the outlet for rates. The two-year yield falling.

You can see there in two steps. The first step was the jobs report came in a little bit lower than expectations. And the second step was that ISM services. I'll take these one by one. You have the $232,000 jobs report that came in, $2,000. 23,000, sorry about that. And then what you had is 28,000 revisions downward. Three and a half percent, two ticks lower on the unemployment rate. Average hourly earnings falling, rising 0.3 percent, but they had revised down the prior month.

And also this number at 0.3, which is kind of modest. Participation rate rising by two-tenths more people in the workforce. That takes pressure off of wages. And you see the revisions again taking 28,000. The I-SEM services, that was the big miss, huge miss, in fact, falling to 49, well-blower. the 55 expected and dropping below 50 for the first time since coming out of recession in 2020. It's now suggesting contraction in that sector. Hard for me to believe, but it is. The price is paid index hit its lowest level in 11 months. So the market thought it all meant

less Fed, but Atlanta Fed President Rafael Bostock in an exclusive interview after the number said he's still full steam ahead on hiking rates above 5%. What I think is the most important, actually, is just to hold there and stay there and let that policy stance really grip the economy and just make sure that the momentum is fully arrested so that we get to a place where demand and supply start to become more into balance. In fact, multiple Fed officials today acknowledged some progress on inflation but gave very little on the rate outlook. So markets, we're going to give an outstanding ovation to the data today. The Fed sounding decidedly unimpressed. Kelly? I want to ask a quick question if I

might, Steve. Unemployment is at historically low levels, right? Number one. Number two, job growth throughout the course of 2022. If I read correctly this morning, the second best in total numbers ever. Why do people think the economy's not doing very well? Well, I mean, in the first instance, Tyler, what I learned this year, and you know I've been doing national polls for probably 15 years now, maybe longer than that, 17, I think it is, is that inflation trumped everything. People's views on the economy were decidedly colored by inflation. And you're right, more Americans have jobs now in terms of the percentage you want them than in decades. And there's a group of people who think these high rates are going to create a recession, not necessarily have one now,

but that is, of course, in the future. Right now, we're looking, Tyler, I want to say at GDP, could be in the 3% range for the fourth quarter. The economy decidedly accelerated GDP-wise in the fourth quarter. There's an expectation that's going to slow down now amid these high rates, but right now it does appear as if the economy is moving along, although with high inflation. All right. Steve, thanks. Now, speaking of jobs, a new pay transparency law in California is giving us an inside look at what some of the biggest companies in the world are paying their employees.

To no one's surprise, most of the salaries are in the six figures with big names like Apple, Google and meta, posting mid to senior level positions with salary ranges from 120 to well over $300,000. CNBC.com reporter Kiff Leswing has the story here. Kif, what are you learning? Hi. So this new law went into effect on January 1st, and it gives us all a chance to look at big tech salaries kind of for the first time. But it's important to note that these salaries don't tell the entire story, especially for big tech engineers. restricted stock units can make up over half of their compensation. So people gunning for high-end jobs need to understand that these salaries aren't your total compensation, that you will get benefits, 401K match, and other stuff on top of that, especially in the technology industry.

Well, I think the important point here is that, you know, kind of like finance, you get your base, and then you get your bonus in tech, you get your base, and maybe you then get stock options, although a couple years ago that probably looked a little more attractive than it does now, what you say overall about the compensation details that are revealed here, Kiff, and the impact that's going to have across the valley? Well, it's very important. I talked to the sponsor of this bill, and part of the thinking was to reduce pay gaps. And so one of the things that tech employees can now do is look at job listings with their same title and then bring that to their boss and say, I'm underpaid.

So transparency is expected to float a lot of boats here. So are the requirements for reporting that you report a range, in other words, from 100,000 to 200,000, which is obviously a 100% difference? Or what? How granular and tight are the reporting requirements? And couldn't a boss say, well, look, you may be underpaid, but we're not the same company as Oracle. We don't have the profit margins, Oracle does. so we're not going to pay what Oracle does. Well, there's still a lot of room for negotiation, even with these salary ranges. As you said, some of them have ranges over $100,000.

Now, I've talked to HR experts, and what they say is these are accurate ranges. You know, for this title, you know, there are multiple employees at this company who are in these ranges. So for people who, you know, there will always be a negotiation at the end of the day. When the range is just a starting point for you really to go to your boss and your employer and make sure you're getting paid what you're worth. All right, Kiff, thank you very much. We appreciate it. Kiff Lenswing.

We appreciate your reporting there. All right, ahead on the program, the first trading week of the year coming to a close. It's kind of been a meh kind of week except for today. Pretty good, right? Yeah. It's been a better week than Kevin McCarthy's had. Let's put it that way. We'll take a look at this year's top performers so far in three-stock lunch.

And as we head to the break, check out shares of the solar names that are surging. Canadian solar leading the way up 9%. I'm Contessa Brewer. Here's your CNBC News Update this hour. The Securities and Exchange Commission clearing former North Carolina Senator Richard Burr of insider trading allegations. The SEC investigated whether Burr violated federal insider trading laws by selling more than $1.6 million in stocks before the market crash. during the early stages of the pandemic. One of the lawyers defending conspiracy theorist Alex Jones has been suspended from practicing law in Connecticut for six months for improperly sharing confidential documents.

According to a judge, Norm Patis failed to safeguard sensitive records of the families involved. Alex Jones has already been ordered to pay more than $1.4 billion in damages after a jury trial last year. And to Al Roker returned to the Today Show after being away for two months because of health. health issues. Roker was first admitted to the hospital in November for a blood clot in his leg. He was also unable to co-host last year's Macy's Thanksgiving Day parade, and it was the first time in 27 years he hadn't been at the helm. So we are glad to see him back and give him kudos for continued good health. Tyler. Absolutely. Al is one of the great guys in our business, and we're glad to see him back and healthy again. Thanks, Contessa. Ahead on power launch will 2023 be the year of

major market reversals. Energy had a big year. Can it repeat that big year? On the other hand, the broader market struggled as rate hikes and inflation uncertainty held investors' attention. It's rare to have two bad years in a row. What can derail a possible turnaround? We'll be back to discuss that and more in just a moment. Welcome back to Power Lunch, everybody. Let's get a check on the markets with just about 90 minutes left in the trading day. Christina Portson-Evelas has some of the key movers for us. Christina. Well, Tyler, bad news is good news for markets today. Software U.S. wage date, an inverted yield curve, and a contraction in the service industry is helping the S&P 500 right now snap a four-week losing streak and bringing the NASDAQ pretty much almost a session

highs. You can see all indices above 2%, and they could potentially close in the green if this momentum keeps up. But those weaker economy numbers helping drive up gold, which is about, yeah, 1.8 almost 2% higher today. Retail and semiconductors leading the NASDAQ higher. Costco is the biggest winner, up almost 7% after a strong December holiday sales report. Other retailers like Walgreens, Ross, Dollar Tree, are all up in sympathy.

But that's not the case for Bedbath and Beyond. Still plunging today, down 21% after warning it was considering bankruptcy. And we talked about those chip stocks. You got Lamb, Broadcom, KLA, all soaring on the NASDA. Microns on pace for its best week since December. 2021. You could see lamb up, oh, almost 6.5%.

And lastly, with a jump in oil prices that we're seeing, N-phase energy is actually one of the biggest laggarts right now on the NASDAQ, down about 2.6% at the moment. So we're seeing a reversal for markets this week. I guess you can say a good week. And like Tyler said, not a good week for McCarthy.

It just has taken the markets a few tries to get it right, just like that. Christina, thank you. That's life, right? 2022. May have been a very bad year for stocks, but it was a great year for oil. WTI crude surging early in the year after Russia's invasion of Ukraine drove up prices. That resulted in some record profits for big oil, but oil prices have come way back down. So will the same happen to energy company stock prices? Let's ask Sam Margolin, managing

director at Wolf Research and Dan Pickering, chief investment officer at Pickering Energy Partners. Sam, are you concerned at all? Not really. Happy New Year, by the way. Great to be with you and Dan as well. No, it's not a concern. I think it's pretty much in line with expectations. Demand has been a risk for oil markets for the whole year, especially when the prices got very high. And I just think we're seeing that manifests in oil, you know, bad news is bad news. And that's just what's moving the markets today. What helps the equities, though, particularly the majors, is that they've paid down a lot of debt over the past year and a half of really strong earning. So they're entering what might be a recession or a touchy economic backdrop with the

strongest balance sheets they've had in years. And that's a reason why these stocks can be defensive, even if oil remains volatile. And by the way, oil's lower than was last year, but it's a lot higher than it's been really in any other year since 2014. Oh, interesting. And as you said, Exxon and Chevron are your kind of two main picks here. Dan, what about you? You're looking a little bit elsewhere in the space. And what do you think about the idea that the oil price today is going to catch up in a bad way with stock performance in the months to come. Yeah, Kelly, I think that oil is okay. I'm going to take the over from where we are today, given recovering demand in China,

the lack of SBR release. I tend to think that we're going for a three-peat in energy stocks, two years of outperformance, two years of being the best group in the market. The question is it's underowned. It's cheaper than the market. All of these things, I think, are playing well for the stock. The majors are fine. I tend to look a little bit further down market cap to some of the domestic producers, Permian names, companies like Devon Energy, Diamondback Energy, Slumberge, Conoco.

I think those are names along with an Exxon and a Chevron that are going to do really well. I think it's a three-peep for outperformance versus the market. Will we get another 60% move? Hard to say, but it still feels good, I think, to be involved in energy. You know, one of the subtexts that we've been talking about all week is whether the global economy stumbles a little bit, potentially later in the year. If that were to happen, Sam, what would happen to oil prices? Well, it's already happening on both sides. I mean, I think the data you're seeing is realistic. The economy is having some struggles in the context of rates rising and a lot of inflation.

And so that's coming back to oil prices by way of demand, particularly in the U.S. Dan's right. China has upside because of a reopening scenario. But there's a lot of inventory in China that's accumulated as well within their lockdown. And China's actually ramping up their exports of refined products, which could ease the supply constraints for diesel and some other factors. So I think the risk that you're describing are actually happening right now. And the fact that energy stocks are working and multiples are expanding is a pretty good sign for the future and for Dan's call as well. I agree. I think we're going to have another year of relative that performance.

All right, Sam Margul and Dan Pickering. Thanks very much. We appreciate your perspectives. Thanks a lot. Thank you. All righty. A double dose of volatility, extremely rare for stock prices to fall two years back to back, not unheard of, especially during significant downturns. We will discuss that next.

Welcome back when to bring your attention to an event taking place right now at the White House. The president marking the two-year anniversary of the January 6th insurrection. We'll monitor his remarks bring you any further news as we get it. All right, welcome back, everybody, to power lunch. Stocks continue to climb higher today as investors see more signs of easing inflation in today's jobs report and ISM data. After a down year, can the market make a turnaround in 2023? Let's discuss that with Ron Insana, Insana, senior analyst for CNBC, commentator, also with us, CNBC contributor Michael Farr. He's chief market strategist at

Hightower Advisors. Welcome to both of you. Michael, you characterize yourself as relatively more cautious than maybe you typically are. Explain why. Funny, Tyler, I always think I'm relatively more cautious than everybody most of the time. But when statistically we're supposed to go into a recession this year and earnings are supposed to go through a contraction, it's hard to be, you know, let's go all cash, and you certainly don't want to be in the thin branches of risk right now. So lots of things gearing up against us. But I think there's still opportunities longer term in those companies with good balance sheets and good cash flow and things, too, that have been beaten up that you can, I think, probably continue to buy. But being really aggressive in here,

I think caution is probably warranted. Ron, we heard earlier some sort of back and forth about the Fed and whether we should believe what they're saying. They said pretty clearly in those minutes, there is not going to be any interest rate relief coming in 2023. Should we believe that? Well, I don't know, Ty. Well, you know how I feel about all this. I mean, we're getting more and more data that comports with the position I've had for quite a number of months now that inflation peaked in June. We're seeing weakness in the service sector. We'll look at the employment cost index and CPI in coming weeks to find out whether or not we get confirmation of that. And we could be heading toward a recession. It's very rare that you have a yield curve as inverted as this one, service sector,

manufacturing sector, showing signs of weakness, and the real estate market in a complete recession without getting a general recession somewhere down the road. One would suspect they would respond to those conditions if and when they occur. But look, I'll take the benefit of a pause. Would it be a pivot or a pause? Well, I think first a pause and then a pivot. And I think that's critical going forward. I think we're going to need a couple of peas to happen this year. Pandemic is going to have to completely go away in China, or that's going to have to work out some way advantageous to Chinese economy. Profit recession, if it occurs, is problematic.

A pivot's going to be required. And Leon Cooperman this morning with our colleagues mentioned, looking for a new bull market in this environment without help from the Fed might be a mistaken way to look at this year. How do we figure in Michael Farr the fact that the Fed is not only tightening rates but unloading content off its balance sheet and what that will mean. Well, I think they're doing exactly what they, you know,

they're doing what they said they were going to do, Tyler. They're tightening monetary conditions. And for the past 10 or 15 years, the Fed has been our backup. The facts here as investors in the markets. Things that get tight. The Fed would cut rates, stock price. They've completely changed that role. So they're the ones who are doing the tightening.

I think they're going to do it not only on the balance sheet, but continue to do it on rates. Will they go too far? Yes, they'll probably go too far. But to the question you ask, Ron, will they really stick it out through the end of the year? Probably, but maybe not.

You know, if they get things wrong enough, if we have some other exogenous shock, they may have no choice but to actually stop and pivot. I'm figuring that Jay Powell's going to do what he says he's going to do and stick with this rate hikes and probably get quiet

and leave the cost of money high for the balance of the year. And I think we've got to see an uptick in unemployment. Until you see unemployment north of 5%, you typically see wage inflation higher than CPI. They need to equal out, kind of. Can I ask both of you, what would make you at this point rip-roaringly bullish, Ron? Fed would have to stop or pivot.

I think that, you know, from a secular perspective, Kelly, I think that's the only thing really that launched new bull markets. And you look across, you know, the balance of history, and you do not get raging bull markets while the Fed is tightening. It's Marty Zweig, you know, rules number one and two, don't fight the Fed, don't fight the tape. And, you know, the tape has been erratic at best, even of late, with a positive week. So I think you need that tailwind to get a secular bull market in place. So, Michael, three of your choices, I want to move on to a fourth here, RTX, which is Raytheon, obviously defense and aerospace,

Google and FDX, but I want to come back to a stock that I know you like to talk about, and that is Johnson & Johnson. Can J&J be J&J without band-aids? It always is tough when you can't have your big brand. You know, one of my other stocks I like is Mondalese, and they have Oreo cookies.

They've got to keep Oreo cookies. Yes, I mean, of course, J&J is a hugely broad company, and yes, it's a brand product for them. But no, J&J can continue to grow. And to that list, Tyler, I'd even say Valmont, which has been one of my picks for a number of years now in that infrastructure space. There are some names like Valmont and others where I don't think they're getting the big crowded trade, perhaps the J&J is getting, though, you know, with a AAA balance sheet and that dividend. I'm not selling it either. I stick with my J&J as you know.

Well, it sounds disturbingly like Voldemort to me, but whatever. Far and farther. Thank you guys. Ron and Michael, we appreciate it. Happy to hear. You bet. Thank you. And Costco reporting strong sales and today having its best day since March of 2020. Should you buy this stock in bulk?

We've got that and some other big winners this week coming up in three stock lunch. Welcome back. Time for today's three stock lunch and we're looking at some big week-to-date winners to start the year. Costco higher by 7% leading the S&P after those strong December sales numbers. Delta Airlines up 9% this week after a few upgrades and the announcement of free Wi-Fi. And perhaps some booking tailwinds from South. Southwest disaster. And finally, Freeport MacMaran, the copper miner, up 12% this week and 6% today on an analyst's upgrade and rising commodity prices. To trade these names, let's bring in Boris Schlossberg of BK Asset Managing, Managing Director and a CNBC contributor. Great to see you, Boris. Let's start with Costco. Do you like the stock here?

So 31 times earnings definitely a little expensive at this point, but it is really the preeminent brand in the space. And I think, you know, what this is the story of Costco is telling us, I think the middle income and the upper income American consumer is kind of settled into this very comfortable two-way shopping behavior pattern where everyday goods are bought at Amazon and then you buy everything in bulk at Costco. And I think that behavior pattern is clearly being reflected in the sales of Costco at this point. Company is tremendously a great executor of talent. They basically have some of the best merchandising and selection. out there. So to me, I think on a long-term basis, great compounding stock. They've increased their dividend 19 years in a row going to increase it even more. It's not a, you know, not a rich dividend, but it's all going to grow. And I think a long term, it's just an amazingly good stock. Well, let's move on to Delta, Delta Airlines. So Delta is very interesting. Delta had a huge upward guidance. They literally doubled their fiscal 23 revenue and they're going to have about $2 billion of free cash flow. I think it's just a strong testament to the fact that they are

probably the leading brand in the space at this point. Certainly they have the best, the lowest cancellation time, very, very good brand image with the consumers. They probably are, like you said, going to get tremendous amount of flow from Southwest because of the Southwest disaster. And they're benefiting from this Frankensteinian new word called Bleasier, the Bleasier Traveler, which is kind of like this traveler that combines both business and leisure, at the same time. So I think despite the fact that ISM services today was very weak, it's not really showing up in the incomes of consumers. Travel demand still continues to stay strong. And the company is certainly the preeminent leader in space. So you got to like Delta at this point.

You know, I can't resist that bleisure. I want to dwell on that for just a moment. But we have to move on to Freeport, MacMran. What's going on with the commodity space for us? So, I mean, FCX is basically copper, and copper is the metal of the future. Copper is the metal of electricity, and electricity is the fuel of the future. Basically, if you believe that the EV market continues to take market share away from ice, you need two and a half times more copper for an electric vehicle than you do for an ice vehicle. And that is why FCX, I think, continues to rise, rise, rise. Furthermore, on a much longer term basis, the market is projecting about a 50 million ton shortage of copper by 2030. There's just going to be way too little supply for the kind of

demand that we have going forward. And by the way, it's not just EVs. It's also wind power and solar. All of that is needed for copper. So it's just structurally a very, very strong secular bull story. It's going to have very, quite a lot of volatility because China, no China, the recession, no recession, but long term, secularly, it's just, I think, a tremendously interesting story. I only care if it's a, if it's Dr. Copper as an indicator for us. If it's now a secular story, I'm not moving on. I'm going to find someone new. There's also the dollar, Boris. How does that factor into everything here?

And where do you see that going? I think lower. I mean, you know, I tweeted out today that the dollar is definitely going to get hurt on that ISM number and it dropped about 150 pips against the yen after that. I am in the camp of Ron and son, everybody else, that the Fed has got to stop. They have to stop for everybody's sake and certainly for their own if they don't want to drive us into the ground at this point. So I think the story is not going to be, oh, you know, we're going to cut rates, but I do

think the story is going to be we'll wait and see. And that's the story is going to come much soon than the market expects, because at this point, there's literally zero reason for them to raise rates. Inflation is dead as far as I think any kind of a macro point is concerned. And wage pressures were relatively modest. Labor does not have, this is not in 1970s, labor does not have the power to negotiate like the 1970s. Wage push inflation is the story of the past.

So I hope he's not living in the 70s and I hope he comes to his census. So if that's the case, dollar probably gets weaker from this point. Wow. A big hope to be sure, but that is the market debate in a nutshell right now. Boris, thanks so much. Thank you. or Schlaasberg. All right, stocks continuing to rise right now.

We are near session highs. Look at that, a 714 point gain for the Dow. Much more on the markets when we return. Breaking news now on that continued drama surrounding the House leadership. Vote. Elon Moy has the story from D.C. Hi, Elon. Well, Tyler, Kevin McCarthy is inching toward the finish line in the 13th round of votes for Speaker of the House, but he is not there yet.

This time around, his opponent's. didn't even bother to officially nominate a challenger. McCarthy was able to flip one more Republican lawmaker this time around. In the previous round of voting, he flipped 14 seats. The current tally appears to be 214 Republicans voting for McCarthy. Six Republicans, though, are still voting against him, and that leaves him several votes shy of the majority that he needs in order to secure the job. Now, from here, the math does get a little bit tricky because some members will have to leave town.

and some are coming back into town. And some members say they're never going to vote for Kevin McCarthy, no matter what. But bottom line, guys, Kevin McCarthy is getting closer to wielding the speaker's gavel, but he has not clinched it just yet. How many more votes does he need? And what was it, do we know, that flipped that large block, but not large, but maybe a dozen or so votes in his direction overnight? Yeah, I am hesitant to give you a specific,

number on how many more votes he needs, Tyler, because it all depends on how many members actually end up voting and how many end up voting present, even if they are actually in the chamber. So the number can move around a little bit, but he will need a couple of more. And one of the things that we know that McCarthy has laid on the table to try to entice members is giving them spots on key committees and ensuring that they can get on the committee that shepherds bills to the floor, agreeing to doing things like voting on a balanced budget. Many of these members are worried about what they see as wasteful government spending, and that's been a real animating factor in a lot of these behind-the-scenes negotiations.

The committee that is most critical there in shepherding bills to the floor is the Rules Committee, correct? That's right. There is some reporting from NBC that these hardliners were looking for as many as three seats on the committee, unclear where exactly they're going to end up with that. But that's part of the negotiations. There was one member, Representative Andy Harris, who was the one who flipped during this round, who could be seen talking to some of McCarthy's allies on the floor as that vote was going on.

So this is coming down to the wire. All right, Elon. Thanks very much. Elon Moy's been a busy week. And let's take a look at this market. Session highs, Dow's up 730 points just about, or 2.2%. Look at the NASDAQ, Tyler, up 2.7%. And there you see, Apple up 4% today. Close to turning positive for the week. The week began a little soggy, but it is ending on a decided upnote.

There is Apple. of four points right now. I would say it's ending thanks to soggy data now. Yes, yes, exactly. All right, folks. Have a great weekend. Thanks for watching, Powerline.