Power Lunch - Tail Wagging The Dog?, Pulling The Plug 11/10/23

Episode Date: November 10, 2023

The bond market and bond auctions have suddenly become the driver of stock market action lately, instead of the other way around. Is the tail now wagging the dog? We’ll debate.Plus, there are growing concerns about alt-energy player Plug Power. The shares are plummeting after a warning in the company’s earnings report about its cash position. We’ll get the key details. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to power launch. Alongside Kelly Evans, I'm Tyler Matheson. Welcome to a Friday edition coming up. The tail wagging the dog, how the bond market and bond auctions have become the driver of stock market action instead of the other way around. Plus, growing concern. Shares of plug power plummeting today after a warning the company's earnings report in the company's earnings report about its cash position. And now it is seeking a lifeline from the federal government. Kelly. Let's get a check on the broader markets, which have been moving towards session highs this afternoon. The Dow's up 307 points, nearly 1%. The S&P's back over 4,400, up 1.3%. And the NASDAQ is the outperformer up 1.8%. It's also been the outperformer all week long. Now, Tyler mentioned plug power. That stock is down sharply.

We'll have more on this nearly 45% decline. It's a little over $3 a share now coming up. Win Resorts also tanking today. It's biggest drop in more than a year after earnings and revenue. beat expectations, but Macau weighing on the stock. A familiar theme, it's off the lows, actually. It's down about 6%. Vegas still doing well. And in addition to the earnings news, the company also saying they reached a deal with culinary workers to avoid a strike. Well, Fed Speak has been a big driver of the market action this week. We heard from the Fed chair, Powell, yesterday. And in the last hour,

the San Francisco Fed President, Mary Daley, joined Kelly and Steve Leasman on the exchange. And Steve is back now with the highlights. Hi, Steve. Hey, Tyler, yeah, the San Francisco Fed president saying in our exclusive interview that Fed policy is in quote a good place, a phrase that's been used by Powell when he's happy. He hasn't used that phrase, though. Though Daly said it's restrictive enough to reduce demand and bring down inflation, but also poised if necessary to hike again if inflation does not fall. She stops short of calling policy, quote, sufficiently restrictive.

And I put a quote, her on that because that's another phrase that Powell's used. That's the rate where the Fed has suggested it would stop hiking. It is far too early to declare victory. And I think that's why, you know, there's a lot of demand for certainty that we would say we're done or we're definitely hiking. Prudent policy, optimal policy means we stand in the ready position, ready to stop if the inflation data continue to perform well and ready to raise again to get to sufficiently restrictive if we need to pull the reins back on the economy even more. The other comments were similar, but I'd say not quite as Hawkins is Fed Joe J. Payle yesterday. who seemed to lean into the possibility of another hike if the data warranted it. And a bit more than Daly did.

As for Daly, she kept the option on the table and added, she continues to think the Fed can bring down inflation without a deep downturn, though she says she's looking for job growth to fall to a trend of $100,000 per month and for growth to run below potential for a time. It was a nice chat, Kelly, wasn't it? Thank you so much for bringing that to us, absolutely. I disagree with your idea, though, that this is the tail wagging the dog. About bond auctions.

I'll tell you why. To me, do you ever play football where they tell you if you want to know where a running back is going and look at his belly button? Right. Right. To me, the bond market's the torso. Yeah. And usually it's really boring. It doesn't move a lot. But it's not the tail. It's a huge market that usually provides stability for the stock market to go up and down. And right now it's not. That torso is moving a lot. The torso is moving a lot. But the direction since mid-October has been down in interest rates. Yes, it has been since generally thought. up in stock market.

They are extraordinarily at the moment, joined at the hip, and we have major news events in these bond auctions, because this week we had the 10-year I thought went well. I disagreed with Rix's, what do you give it, a C-minus? Yes. I'm like, God, it was a good, I thought it was a better auctioned that. But then he gave the 30-year a D-minus, and I thought that was right.

But it's interesting to see how, if you put up a 30-year, the market rethought that. It's concerned with that level there. 30-year at least initially popped and looked really sloppy. And for a time there, anybody who bought into that auction was underwater, which is not the way you want to sell something, right? It's like saying, you know, take this a car and then it breaks down on the way home. But now you can see it's back down below where it was before the auction show. That's good.

I think these represent risk moments for the next several months, Tyler, and we're going to have to watch. I think right now, not so much the bills auctions, but when they do those long-end ones, there's a couple in a couple weeks, so we're going to have to watch each one of them. All right, Steve, thank you very much. Let's talk more about the bond market now. Bond yields and those bond auctions have been huge drivers of the market action lately. Let's get kind of the recap, Rick, from Chicago. And where do we go?

I mean, I guess it's just this balance, this tug of war between the economic downturn, potentially, and the deficit. And kind of one day to the other, which one of those is more in the driver's seat? Well, I think our job's a lot easier, today, Kelly, because I think University of Michigan really did the trick, and I'll tell you why. Might only be a November preliminary look, but I enjoyed Steve and Mary Daily's interview, and the main reason I did was a statement that the Fed's really paying attention to what's going on on the ground, and the reason that is because their econometric models are outdated,

and the seasonalities, they have no clue, and when they start using terms like black matter to describe the premium in between the term structure of interest rates, that makes me a little nervous. So let's look at Michigan. Look at the headline. 60.4. This chart starts pre-COVID. Fall of 2019. Does that instill confidence the way it's been moving down? Then let's switch gears a bit. Now let's look at the one-year inflation. So if you're worried about what's going on on the ground, this is a survey by very smart people and it probably matches the bill. 4.4. Two months ago, Two months ago, this was 3.2%, a two and a half year low, and now it's 4.4. The 5 to 10 year hit 3.2 today.

Well, the last time it hit 3.2 was in 2011, but that doesn't matter. When I look at these numbers, I want to know the last time it was higher than 3.2, and that was 2008, both in May and June, when it was 3.4. To me, when I look at that and blur my eyes, I see the word stagflation. to me, you have the best of or the worst of both worlds, depending on what your position is. We're not getting the growth and it looks like it's slowing, yet inflation doesn't look like it's slowing nearly as fast as growth would dictate. And finally, how did the markets act? Look at twos and tens. Right now, twos are up, get this, 30, 3-0 basis points on the week.

And at 462, we see that tens are up five basis points on the week. And also, with regard to at auction on the 10-year, it tailed, and it hasn't been able to move lower. We tested 4.5% right after the auction. We're nowhere near it now. Tyler, back to you. All right, Rick Santelli, thank you very much. Let's get to Bob Pisani now for the other side of the discussion on equities. Bob, what have you noticed about stocks following yields, particularly around those bond

auctions? You know, Tyler, bond auctions were not often stock movers in the past, but they can be Now, recently the direction of the 10-year treasury yields have usually been the most important determinant of intraday stock prices. Now, for several weeks, stocks have tended to spike down on higher volume when bond yields move up, usually on stronger economic news. But yesterday, we saw yields move up on a poor 30-year auction. ETFs often used by day traders like the S&P 500 ETF, the symbol is spy, SPY.

it saw a spike in volume when the auction results came out at 1 p.m. Eastern time, and the S&P dropped over 25 points in a matter of a few minutes. There was also a second spike down in price and a spike up in volume. You can see at these charts here at 2 p.m. when J. Powell said he was not confident that rates are high enough to finish the inflation fight. Now, this inverse relationship between stocks and bond yields is not perfect, but on days when there is a significant move in yields in either direction, it is usually a reliable indicator of the direction of stock prices recently.

This morning, before the open, for example, bond yields moved down. Stock futures immediately began moving up. Look elsewhere. On Monday this week, yields this week yields up, stocks flat. On Tuesday, yields were down, stocks were up. On Wednesday, the same thing. Yields were down, stocks were up. And yesterday, on Thursday, yields spike.

biked up big, as you saw there, and the market moved down. So I think we have to add bond auctions now to economic news as potential market movers. I see the 20-year auction will be November 20th, the 10-year, which is going to be the more important one, December 11th, the 30-year the next day, December 12th. Tyler? Bob, thank you very much. For all the worries about the negative impact rising yields could have on stocks, especially tech stocks. And NASDAQ is still up 30% in 20-23 as the 10-year yield has jumped. And here's what Jim Kramer had to say. say about that from yesterday's Your Money event. The great runs, if they can be moderated by the Fed, in other words, if the economy keeps

going high and stocks keep going high, but the Fed can somehow cut off the high of the economy, stocks will go higher still because you fight the Fed and then ultimately you actually beat the Fed. And I know it's been 25 years since this has happened, but it did happen once before, and this is just another time that looks very similar to some of the runs we had in the 1990s. All righty. Joining us now to talk all things market economy and the Fed, Phil Orlando, Chief Equity Strategist with Federated Hermes and Ron Insana, chief market strategists with Dynasty Financial Partners,

also a CNBC contributor. I have had the advantage of sitting here for the last three minutes watching Ron Insana's body language and his facial expressions and his head shaking. I don't know where you want to start. Do you want to start with what Rick Santelli said? Do you want to start with what Bobazzani said? Do you want to start with what Jim Kramer said? It seemed like you disagreed with all of them.

Yeah, too. Yeah, not usually, right? I mean, it's not my M.O. to disagree with my colleagues here at CNBC on a regular basis. Well, you're free to. First of all, like, I don't think a 30-year bond auction means dittily squat. I don't even know we're auctioning 30-year bonds still, right? I mean, they're not really the bell weather for the market. They're, you know, a smaller, much smaller piece of the auctions than they used to be.

And now, again, as Rick himself said, yields are lower on the 30-year than they were before the auction. That happened a lot when I was growing up in this business. You'd have a bad auction next day somebody come in, buy it at a discount yield will drop back down. So I don't really care all that much about that stuff. I do care about growth. Growth is slowing down. Fed's going to cut next year. I don't care what anybody says.

Could I restate? Because you know, Ron has this perfect ability to always get me going, wait. But could I restate maybe what you've said to say, you're more concerned about the slowing economy than about the deficit? for now? For now. But would you acknowledge that if we weren't slowing, that maybe you'd be more concerned about, you know, the unsustainable fiscal situation?

Well, if we were growing quickly and the deficit we're getting larger, I mean, that would be problematic. Now, that was the past year. Yeah, but having said that, you know, the Chinese have sold bonds and the Europeans, my friend John Hilsenrath, our friend John Hilsenrath, used to be at the Wall Street Journal, just pointed out that Europeans have bought more than the Chinese have sold.

So the net foreign holdings of U.S. treasuries are actually higher than they were a year ago. So I'm a little less worried about some of these things. Well, they're structurally down from like 45 to 30. 30 percent. But anyway. Yeah, but then net foreign holdings are up to 7.7 trillion, which is above a year ago level, no matter how you want to cut it. So, look, everybody's talking about, you know, if Jim was saying is the economy going to get too hot, fourth quarter GDP forecast the Atlanta Fed now survey, 2.1 percent, down from 4.9. And Atlanta Fed is usually the outlier on the high side. Yeah, yeah. And so you subtract a full percentage point of growth from that just as the way it's calculated. So the things I worry about, the wall of commercial real estate debt that's coming due, next year, multifamily residential debt that's coming due next year that needs to be refinanced,

slow down in the economy that's coming. And, you know, that implies to me that the Fed's going to get easier, not tighter. And I think all the kind of job-boning we're hearing for the Fed is at the moment nonsense. All right. Nonsense, says Mr. Insana. Mr. Orlando, where do you come down in this debate on yields and equity prices and how the two are interrelated? So let me go back to what Bob Pisani was just talking about a moment ago. He was looking at. He was looking at. at the day-to-day relationship between treasury yields and price earnings ratios or the performance of stocks over the last week. Let's pull that back to the last several months. From late July, benchmark 10-year treasury yields were about 3.5%. They ran up to 5%. In that period,

the S&P 500 dropped about 11%. We were looking for a pullback of about 8 to 12% down to the 4200 level. S&P came all the way down of 4,100. Now, what's happening, and I agree with Ron, underlying economic fundamentals here are just simply more important. You look at the labor market, the last set of jobs reports we had, the adjusted non-farm payroll number was soft, household survey was terrible, both ISMs have been down, the Michigan data this morning was sloppy. What all of that is telling us is the economy is slowing. Inflation is still kind of sticky and persistent, but we think it's going to be sort of grinding lower. So for all those reasons, treasury yields ought to be working lower. We'd like to think the Fed is done hiking. I sort of agree

with Ron that the next cut from the Fed is, the next move from the Fed is going to be a cut. We don't think that cuts coming until the back half the next year, but we think the Fed is done hiking. And that in part, the record, the idea that the federal Reserve is done hiking and is on pause here. Stocks historically rip on pauses, and that's consistent with the 7% rally we've seen in stocks over the last, you know, three weeks or so. So let me turn back to you, Ron. Rising interest rates for the first half of this year didn't seem to matter much to stocks. The markets went up pretty pretty night. Until then in July, as Phil pointed out, they started to matter. Because as the 10-year yield went.

higher, equities went lower. Now, the 10-year yield seems to have maybe rolled over off that 5% peak. There's more talk that the Fed is out of the game of raising rates, at least for the time being, and stocks once again are moving higher. Explain this year. Well, I think there was a little bit of an anomaly, and it goes back to what Kelly was saying. It's because the economy is so strong that it overcame the rising rates? Well, certainly there's a case to be made for that since residential real estate.

If you're an existing single-family homeowner, you don't need. have refinancing risks. So you're not as interest rate sensitive. Corporations termed out their debt. They're not as interest rate sensitive. Credit card delinquencies that are going up. Auto loan delinquencies are going up. Those other debts that are coming to next year that mentioned are going to be problematic. I think there was just a, you know, there was a little shock in the bond market about potential for, you know, the deficit to get out of control or worried about the shutdown, all these different things that kind of move bond yields higher somewhat more unexpectedly. I think the market was starting to price in a pause from the Fed. They got it, but then there

were some jitteriness around what was, you know, kind of the discussion coming from Fed officials. Like I think at the end of the day, you know, one thing we're not talking about when, you know, if there's this worry about inflation re-accelerating, oil's down $17 a barrel. And gasoline is down 80 cents a gallon in the futures market. Did you see the consumer sentiment data this morning? Yeah. Yeah. So maybe it's just to catch up. So maybe it just has to catch up. I mean, you know. But it's interesting. It doesn't match. It doesn't match. It doesn't match. It could be health care. Right. We just had a health care experience in my house where the numbers were truly

When you went to do the enrollment? No, no, no, no. Or just as an event. And it was like off the charts. Yeah. And now, granted, a huge portion is negotiated away. Yeah. But the rack rate is insane.

And you look at some of the stuff. So people get these sticker shot moments and it's happening with real estate. And I think that might be part of it. And the economy is also slowing down. But I don't, I don't see a second wave of inflation coming from any quarter at the moment. You bearish on stocks right now? No, no, no. No.

Let's turn it back to Phil. I think rates are done. Phil, wrap it up for us here. you think the economy is going to slow. Is it going to slow so much that it jeopardizes a rise in equity values over the next six months or so? No. We've got an official soft landing call. And Ron made this point in terms of the disparity between third quarter GDP growth, 4.9% and fourth quarter.

Our forecast is 1.3%. And we've got 1% run rates in the first half of next year. So we think the economy is going to slow materially, but not into an outright recession. So you're still going to grow earnings. Multibles are coming down because the economy is slowing. Inflation is gradually moving lower. Multiple will expand that we think will drive stocks to the 4,600 level by the end of this year, perhaps the 5,000 level looking out over the course of the next year.

So we think this is a good spot for stocks based upon the way the economic dynamics and the Fed policy responses is playing out. We will leave it there, gentlemen. Have a good weekend. Phil Orlando, Ron and Sanna. Appreciate it. Always fun. Coming up another shutdown, showdown. We are one week. No one's even talking about it yet. We're one week away

from the next self-created government deadline. Five days. They have five days. Will this one end with a solution? We will find out. And shares of both Whole Logic, leading the, I'm sorry, just Whole Logic, leading the S&P today, up 6.5% after they beat on the top and bottom line. That's your

our mover to the upside today. To the downside, it's Illumina, under pressure again, down 9% the worst on the S&P after results. Cutting earnings guidance on pace for their lowest close since 2013 with the shares under 97. We'll be right back. We are one week away from the next government shutdown deadline. Will this one end with another short-term deal like the others? Let's bring in Emily Wilkins for the latest. Emily, what's the scuttle butt this weekend? Well, Kelly, we are back here again. The temporary funding measures that Congress passed at the end of September are going to run out. next Friday night and lawmakers have left DC for this long weekend without a final plan. In the House, Speaker Mike Johnson is facing his first big test in leadership. He's considering several ideas such like adding items like Israel aid or border security to a bill and potentially

breaking the one funding bill up into two parts to pressure Congress to pass more long-term bills. But that two-part plan lacks support in the Senate. We are expecting to learn a little bit more this weekend about what that plan will actually look like. And then over in the Senate, a majority leader, Chuck Schumer, made it clear yesterday that any stopgap measure that goes through must be bipartisan. No matter how negotiations evolve over the next week, one thing is not going to change. The only way, the only way, let me say it a third time, the only way, we avoid a shutdown as with bipartisan cooperation. Schumer has started the process of the Senate passing its own stopgap measure, which will likely be a straightforward bill to continue funding into probably December with no additional attachments or

cuts. Now, we are expecting both Johnson and Schumer again releasing their final plan soon, but once that happens, there is still a long way to getting to a compromise that can a shutdown. Guys, it is very much a possibility that come this time next week. We could be facing the government running out of funding. All right, Emily, thank you very much. Emily Wilkins. And for more reaction to a looming shutdown, let's welcome in Brian Garland. He's Chief Washington Policy Strategist at Steeffle. Brian, what should next week look like? Deja vu of the end of September.

It feels like we were just here a couple of weeks ago. So I think they're going to kind of feel their way through, especially in the House. As Emily described, you have these two different approaches, one, this laddered CR continuing resolution, kind of a newfangled mechanism that some lawmakers have come up with. And I think the speaker is going to try and push that because it placates the right win, other Republicans, but it's not going to pass. And so I think you probably see a situation where you give the conservatives, you know, some room to breathe. And when their approach fails, then I think probably the House, you know, reverts back to some kind of regular CR, just the clean CR, you know, maybe some supplemental funding for Israel and Ukraine. on board, that that's a separate matter. But I think at the end of the day, they revert back to this

clean CR that gets them into, probably into 2024, just a question for, one, how long? And two, does the government shutdown and for how long? And I think the odds of a shutdown are rising. I would have put them quite low a few weeks ago because I thought Congress wanted to avoid this altogether, but it does seem that, you know, the odds of a shutdown are rising. But I don't think it's going to be a particularly long shutdown. So it was this entanglement, let me put it that way, that really brought down Speaker McCarthy, I guess, effectively. What is the risk for the new speaker in all of this? So Mike Johnson is one of the conservatives.

The conservatives never saw Kevin McCarthy as one of theirs. So I think Johnson has, one, a political honeymoon just because he's new to the speakership. And two, he has a little bit more credibility, for lack of a better term, among the conservatives. So I think he's safe for now, but the underlying dynamics, the fractured House Republican Party remains in effect. Moderates and conservatives have very different views of where to go on politics and policy, and it's not easy with a four-vote majority for Johnson to unite both those factions. So, yeah, the underlying dynamic hasn't changed, but I think Speaker Johnson has a little bit

more flexibility than Speaker McCarthy has. As you point out, maybe a little honeymoon benefit there as well. Stick around, Brian, as we turn now to some other news out of Washington, it's official now that President Biden will meet with China's President G. next week in San Francisco. U.S.-China relations always a hot topic for the markets, and Amon Javers with the details. Hi, Aymann. Hey, there, Tyler. Tyler. We just saw fresh pictures of Treasury Secretary Janet Yellen and Chinese Vice Premier Hee Lee Feng, who are meeting. now in California. This is day two of their economic meetings. That comes just a couple of hours after, as you say, we learned the date of the next Joe Biden-Shijimping meeting. That's going to be

on Wednesday, November 15th. And they're saying in the San Francisco Bay Area, not specifically saying where in San Francisco that's going to be. The language that officials are using to set a tone for that meeting is that the U.S. is in competition with China, but doesn't seek confrontation with China. And we've been seeing increased diplomatic activity in the run-up to that meeting next week. Yesterday, Yellen sought to set a calming tone, even as the relations between the two countries have reached what might be a new low point in recent decades. The United States has no desire to decouple from China. A full separation of our economies would be economically disastrous for both of our countries and for the world.

She also cited the intensive economic diplomacy that has taken place. over the past year, beginning with the first meeting of President's Biden and Xi a year ago, almost to the day, in Bali and her own travel to Beijing this past summer. Yellen and her counterpart did not talk to reporters just this past hour, but she has said she and Healy Fang would talk about topics including climate change, debt distress in low-income countries, and what she called the use of economic tools for national security purposes. Now, guys, we are on our way to San Francisco next week where CNBC will have full coverage of the Biden-She meeting.

which will be taking place on the sidelines of the Asian Pacific Economic Cooperation Summit that's taking place all next week in San Fran. Back over to you guys. How do, apart from the economic issues, which are well established here, how do the geopolitical friction points, Israel, Hamas, Ukraine, and of course China's ambitions in the Pacific Rim, specifically with respect to Taiwan, how do they figure into these talks? Well, Tyler, look, we expect all of that to come up in the talks. And part of the reason that you're seeing this taking place in San Francisco and not here in Washington, D.C., all the experts are saying is because the tensions between the two countries are so high right now. It's not to either leader's political benefit to do the full dress state dinner with all the pomp and circumstance and the honors and all that.

So this is going to be sort of a working meeting on the sidelines of this existing APEC summit, which was kind of already on the calendar. So both countries grabbed at this opportunity to set this up on the sidelines because they do have all those things. things to talk about, but they're very wary of appearing like they're honoring each other or doing something formal and diplomatic. All right. Very interesting. Amon, have a good week ahead. We'll be checking in with you, I'm sure, throughout next week. Thanks. Amen Jabbers. And we turn back to Brian Gardner for the significance of this, Brian. In some ways, we don't need to steal any oxygen from the shutdown aversion that we hope will be also happening in Washington next week at the same time. No, I mean, this is going to be a very interesting meeting next week out on the West Coast.

And I think it's a general positive for markets. Anytime that two world leaders are talking and lowering the temperature, it's a good thing. At the same time, there are policy, especially domestic policy issues in the United States that complicate the relationship. You have the expiring 2018 tariffs, which are under review. by the US Trade Rep, an announcement on those are due soon. The administration's been leaking an initiative to put restrictions on chip exports related to AI and kind of closing some backdoor country loopholes

that allowed exporting chips into China. These are major touch points, and they're not going to be resolved by the Yellen meeting, by the Biden-Gee meeting. And so I think, I think it feels good to have them talking, but at the same time, there are differences and there are going to be policy initiatives that are going to cause stress in the relationship for some time. All right, Brian, thank you very much. It'll be a very interesting week ahead indeed.

Brian Gardner, we appreciate it. All right, still ahead. The rise of lazy investing with meme mania in the rear view mirror. Retail investors are flocking to boring, safer alternatives will reveal where they're investing right now. now. And last month, we announced a new franchise, CNBC Changemakers, an annual list highlighting trailblazing female leaders in business. The list will be unranked and will focus on accomplishment over the past year and feature women from companies all across all sectors of the economy. The deadline for applications now is November 17th. You can scan the QR code on your screen to

apply or find the nomination form at CNBC.com slash changemakers. We'll be right back. Welcome back to Power Lunch. I'm Kate Rooney, and here's your CNBC news update. At this hour, a hiccup today in a tentative deal between one of the big three automakers and the UAW workers at a GM assembly plant in Flint, Michigan, voted against the proposed contract today.

That's according to the local chapter of the union. Workers at other plants are expected to vote in the coming weeks, according to the UAW. So far about 58% of members have voted in favor of the deal. The Air Force's new B-21 stealth nuclear bomber took its first flight today in California. The B-21 Raider, shaped like a flying wing, was developed by Northrop Grumman and was first unveiled last December. The Air Force says it's planning to build more than 100 of them, some with pilots and some without. And the world is getting more crowded.

That's according to the U.S. Census Bureau. There are now more than 8 billion people on Earth. But the Bureau says, with longer lifespans, offsetting fewer births, the long-term trend of popular. growth is slowing. Kelly, back for you. All right, Kate Rooney, thanks. Coming up, losing juice. Plug power is plunging after warning. It's running out of cash. We'll get the key details when power lunch returns. Welcome back. Shares of plug power, the alt energy hydrogen firm, are plunging after warning. They may not be able to stay afloat much longer. Pippa Stevens is here with the latest, and this is another high-profile demise amid the alt-energy debacle, for lack of a

better word. Yeah, Kelly, on a really bad day for the stock here. plunging more than 40% and on track for its worst day in a decade after the company issued a going concern warning as it burns through cash while trying to scale operations. The fuel cell maker said last night it's facing quote unprecedented supply challenges across the hydrogen network. For the third quarter, the company reported a wider than expected loss with revenue also coming up short. Margins remain challenged and plug power also pushed out timelines for when its hydrogen plants will actually come online. But perhaps the biggest drafts, on the stock is plug power saying it will need to access additional capital in the market to fund

its operations, with the company exploring a few solutions, including a possible loan from the Department of Energy's loan program. Now, Wall Street did not like this report with at least five firms downgrading the stock, including RBC, which said the company could need an additional $750 million to boost liquidity over the next 12 months. The stock is now 99.8% below its all-time high from 2000. I mean, look at that chart and that really says it all. Is there anybody out there who would buy this company? I don't think right now, and that's because we're still waiting on clarity from the Inflation Reduction Act, and that could be a really big game changer, but the issue is that the parties, the stakeholders are so divided on what the credit should look

like. The Treasury Department hasn't been able to issue any kind of guidance. And just quickly, it really comes down to three things. So when we talk about green hydrogen, the advocates who are very much on the climate-friendly side, say there are three pillars. It should be accounted for on an hourly basis. That's the emissions that are produced when you make hydrogen. Accounted for on an hourly rather than an annual basis. It should be additional renewable energy coming online versus existing renewable facilities being used to make that hydrogen in the electrolysis process. And then finally, regionality.

So the facilities should be close to where the hydrogen hub is located. And so that's what they say that there should be very strict standards. On the other side, stakeholders like Next Era say that if you make it so strict from the get-go, there is no way this industry will take off. And so they want slightly looser accounting and that maybe down the line it becomes more strict. The CEO was on this program about a month ago when they had a filing, a regulatory filing saying they were projecting a sharp rise in revenue by 2027. And this is a strikingly different move four weeks after the fact. The stock was up a little, you know, 6% or so that day. But it would seem that though those expectations were unrealistic, if not unfounded.

And the issue here is that they're not actually producing hydrogen. And so they have a lot of clients like Amazon, FedEx, Home Depot that they make fuel cells for. But they have to buy the hydrogen. And there's only a few hydrogen producers in the U.S. like Lindy and Air Chemicals. And so once they raise their prices, plug power has to buy the hydrogen at an elevated price. And then sell it to their customers. they have, you know, purchase agreements in place so they can't just charge them through the roof.

So they are taking a huge loss on all of that. And their facilities for actually producing the liquid hydrogen. They have one in Georgia. First, it would come on online in July, then August. Now it's been pushed to November. And so that keeps getting pushed out. And every single day, they're burning through a lot of cash. And even once that facility is online,

it's still not nearly enough to supply all of their customers. So there is a big mismatch here between what they're supplying and what they actually make. What if they said about the, they need to raise cash? How will they do that? Stock sales? Oh, I don't think so. With the stock at this price, I don't think so.

Well, I mean, they'll have to go maybe debt or maybe something like the Department of Energy's loan program office. That is one thing they said. But, you know, when your stock comes down this much, you don't really have a lot of avenues. And, you know, Wall Street's not really on board with this story right now. All right. Pippa, thanks very much. Good. All right, still ahead.

Out with meme mania and in with T-Bill and Chill. We'll explain why so-called lazy investing is now having a moment. moment in the sun. Power lunch. We'll be right back. All right, welcome back after riding the roller coaster of meme mania. It seems retail investors suddenly have an appetite for more boring investments. Kate Rooney has the story for us. Hi, Kate. Hi, Tyler. So boring investing is making a comeback. Retail investors are rediscovering the philosophy made famous by Vanguard's founder, the late Jack Bogle. He preached low-cost, passive investments that compound over years. Fans have long called themselves

Bogleheads. They're well positioned right now for the current market where timing has proved difficult. As Bob Pisani has pointed out, just eight days have accounted for all of the S&P 500 gains and higher rates have slammed growth stocks, which are widely held by retail investors. We spoke to one Boglehead who said he feels vindicated now after avoiding meme stocks and watching them surge from the sidelines. I think if anything, maybe it's a little bit of vindication for the tortoise and the hair that I'm happy to be the boring investor. I'm happy to be the boring investor. I'm be the tortoise because while the hair does win sometimes, the tortoise more often than not is going to come out ahead at the end of the day. The Boglehead group has a Reddit page as well

where they describe themselves and the strategy as lazy investing. Robin Hood's founder and CEO Vlad Tenev also told me recently that he's seen more chatter about Robin Hood in that Boglehead's Reddit group versus the famous Wall Street Betts group. Tenev also noted a mentality shift to longer term investing and then flows into bond ETFs. Vanda research also points out, Bond ETF BIL was the third most bought fund last week after the Q's and SPY. As they put it, income-seeking retail investors are now trying to take advantage of the high-rate regime calling the strategy T-bill and chill. Back to you guys. What do we know, if anything, Ken, I don't mean to put you on the spot about flows into

index funds, which of course were kind of a bogal innovation and certainly part of his trademark. So I don't have it in front of me, Tyler, but overall, passive investing, bond ETFs, especially, money market funds are seeing an uptick. So we've seen this resurgence and anything that's offering higher yield. So there's a lot of yield chasing going on. And it is really this new regime. There's a lot of retail investors that have gotten into the markets in the last three or so years, really during the pandemic when interest rates were zero. So they're trying to adjust and figure things out here. I think there's some long-time investors who might go with the old 60-40 rule.

There's a lot of new investors who maybe bought, you know, a meme stock bought one of these high-growth names. And now they're sort of maturing along with the markets and adjusting to this rate environment. But we're seeing that in bond ETFs and some of the higher-yielding products. But ETFs in general and some of those low-cost ways to get exposure are definitely ticking up here. I guess the return of the 60-40 rule has been one of the sort of surprising things over the past year, I get, right? Yeah, yeah. Well, it is, again, some of these retail investors either, moving their money into fixed income or even things like retirement accounts.

It's been interesting to watch Robin Hood at least try to sort of keep up with the changing appetite for retail investors and offering things like retirement accounts, which you talk about those is boring, but it's really things that people need to build long-term wealthier. Thank you, Kate. Kate Rooney, appreciate it. Thanks, guys. And coming up, shopping, staples, and software. Macy's Target and Cisco are all reporting next week. We'll get the trade on each ahead of results in three-stock lunch.

Keep you busy this weekend. We'll be right back. All right, time for today's three-stock lunch. We are looking at some stocks set to report earnings next week. Yes, there are still more earnings to come. First up is Macy's. That stock off its lows of the day, but was down as much as 3% earlier in the session. Here with our trades today. Scott Nations, he's the founder and president of Nations indexes.

Scott, what are you doing with Macy's? Tyler Macy's is a sell. And I hate to pile on while the stock's already down. 48% year to date. People say, where were you in January? But it's never too late to make the right investment decision. And for Macy's, both sales and EPS are expected to decline in both 2024, 2025. Yes, the stock is very cheap and boasts a 6% dividend. But the question is for how long? And it's tough to imagine it's going to be very much longer. It's also really tough to imagine a strategy that's going to work for Macy's. Yeah, you don't see a path forward. You don't see a

path forward. No, I mean, they have been through several strategies, and it's tough to see one that might work for a department store name like Macy's. The short interest is over 11 percent. So I'm not certain I would short it, but if I owned it now, I would not own it when the bell rings at the end of the day. Let me just ask quick follow up to that, Scott. I mean, what do you think the company strategically should do? We can all see that its prospects have vastly diminished. Yeah, many of these companies have tried an online strategy, and you have to think that there's going to be something there. If in an innovative online strategy that doesn't require people to come into the store, that has to be what they focus on. Look at what Amazon has been

able to do with almost everything, and Macy's needs to go down that road because they're not going to be able to compete with Nordstrom. Well, competing with Amazon seems like an even taller task, but I take your point. Let's talk about Target, kind of in the mix with all these names we mentioned. Higher today, it's had a really tough year. It reports on Wednesday, Evercore ISI, adding a tactical outperform on shares into earnings. It's off 27% since Jan 1. Would you buy it here?

I would not. In fact, I would be a seller of this as well. The retail space is just very, very difficult for everybody essentially except Amazon and Costco. Target was once my favorite mass merchandiser to shop. in. That's passed. And they've executed just really poorly, almost horribly. Their solution to shrinkage and shoplifting has been worse than the disease. And it's tough to imagine that. They now have very low inventory. They're trying to cut it very close. So it's tough for them to even take advantage of what would be a sales bump. And given that they have very low inventory going into Christmas,

It's tough to see how Christmas is going to be the savior, if you will, for the company. They have a much better chance than Macy's of bouncing back, but I think they really have to rethink their strategy. All right, let's move on to another one. Kind of a forgotten tech stock. Cisco Systems also reports on Wednesday. Shares flat today recently got downgraded by multiple analysts. So what's your trade here? What do you think of Cisco?

We had to get out of retail to find a buy, but Cisco is that buy. and Tyler, you and I can probably remember when Cisco was one of the biggest companies in the world, if not the biggest company in the world. It was the bomb for a while there. Absolutely. Absolutely. And unfortunately, it's been a long time. But the PE right now is less than 13, a strong business. It doesn't have to go through great growth in order to earn that EPS because, again, it's the PE ratio, because again, it's below 13. it's likely to gain as much in their own product sector from AI, from incorporating AI as any company in technology. And so you talked about boggleheads earlier. You know, they all love a great company at a good price, and that is Cisco right now. All right. So that one's a buy,

two sales and a buy. You got down on, thumbs down on Macy's and Target. Thumbs up on Cisco. Scott Nations. Thank you. Thanks. Going to be a rough retail earnings season, if he's right. Many more. stories to get to so little time left. Let's see what we can get through when closing time comes back. Welcome back. Two and a half minutes and so many more fun store. Well, I don't know if the first one's so fun, but the end ones are if we get to them. Wall Street Journal is reporting that Disney is exploring whether or not its future should include fewer television networks. Part of that process includes determining which of its TV assets have long-term value and which are expendable.

Journal says so far it's determined ABC, Disney Channel, and FX are most valuable. I think there have been rumors of some discussions regarding the ABC network. I remember being at ABC. I was working for Good Morning America at the time the day Disney bought ABC from Cap Cities. Warren Buffett was sitting right there. Wow. What a time. Anyhow, we will see on that one, it's been, of course, rumored for a long time. Anyhow, feeling rich is becoming more and more elusive. A new Ameriprise Financial Survey found that 31% of millionaires, that's people with sort of tradable assets, than a million, call themselves middle class, while only 8% consider themselves wealthy. I guess the ranks of the millionaires.

It costs more to be a millionaire and be rich. There's a quick, big picture point I want to make here. Everyone keeps saying, why are people so upset about inflation when they're doing? But I think everyone understands the purchasing power of the dollar is not what it once was. And millionaires don't feel like what they wanted to feel like anyway. Yeah. This is me. Lyft is also offering credit to airport travelers whose drivers are late this holiday season.

You can get 20 bucks in credits if your driver's more than 10 minutes late. $50 if you're not matched 10 minutes after the scheduled pickup time. I do like this. I think that's a good thing. But I love the credit. Give me the credit, but get me to the airport on time. Indeed. And also, it could undermine the bit.

I don't know how it affects the economics, but they've got to stay profitable. All right. A new report from the information found that meta's virtual reality headsets are have an unlikely fan base, middle-aged, and senior citizens. Apparently they're among the biggest users and fans of the supernatural fitness app. You put on the thing, the whole business. I watched a Golden Bachelor last night. I can see them all in those headsets.

It's just... Wow, Supernatural's Facebook group of 90,000 people. Users over 50 dominate the Convo. Great story on the information. And finally, Purdue is selling chicken feed for humans to eat. How could we not get that headline in today? Just think about that. Go Google it.

They want you to know... They say your chicken is eating better than you... realize. Daggone it. Have a great weekend, everybody. Thanks for watching Power Lunch. Closing bell starts right now.