Power Lunch - Tech Marches Higher, and Shrinking Bonuses 3/30/23

Episode Date: March 30, 2023

Stocks are holding on to their March gains, and it’s tech names leading the way. The Nasdaq is up 4%, while Apple, Amazon, Alphabet & Microsoft are all up 10% or more. Can they continue to lead the way? We’ll explore. Plus, Wall Street bonuses have taken a big hit, down 26% from last year. We’ll talk to New York’s state comptroller about the big impact this has on the economy. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody. Welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us on this Thursday. Coming up, stocks holding on to gains in March, and it's tech that's leading the way. The NASDAQ up 4%. And the gains are even bigger for tech's big for Apple, Amazon, Alphabet, and Microsoft, all of about 10% or more this past month. So can they continue to lead the way? Or are the valuations getting Kelly a little stretched? Plus, Wall Street bonus is taking another hit. A big one, down 26% from last year. We'll talk to New York State's controller about the big impact it's having in the economy. First, let's check the markets, though, as we are in the green. It looks like we're hanging on to some gains. NASDAQ especially, not the Russell, though.

Dom Chu has more. All right, so let's talk about some of the individual movers. We'll start with Charles Schwab, Kelly, Tyler. Right now, the worst performing stock in the S&P 500 down about 6%. Due in part to analysts over at Morgan Stanley, who've cut their rating, on the retail brokerage and bank holding company. It's now equal weight. It was overweight before.

The target price goes to $68. It was $99. They cited, amongst other things, less visibility for customer deposit outflows and an increasing regulatory landscape, which could both act as a drag on earnings growth going forward, so those shares down 6%. There's also more bad news on the jobs front. Roku shares have reversed course and are now markedly lower

to the tune of around 4% after gains earlier on. The streaming video device maker is cutting another 200 jobs or roughly 6% of its workforce. This is a second round of layoffs, the first of which occurred last November for a similar number of employees, Roku down 4%. And we'll end on Coles, which is up 4% today after the mid-scale department store chain CEO, Thomas Kingsbury, recently disclosed the purchase, yes, purchase of over 90,000 shares of company stock worth over $2 million. That's, by the way, his first big insider purchase since 10,

taking over a CEO earlier this year, and that's driving that upside for Cole's tie up 4%. Back over to you. All right, thank you very much. Dom, for a closer look now at the recent rally in technology, let's bring in Christina Ports and Evelas, who is in the house. In the house, but I'm going to talk about the NASDAQ for a second because it's already up, what, 14% this year and on pace to break a four-quarter losing street. But what's behind these big swings is, of course, large-cap tech.

Look at the month-to-date performance of some of these names, Microsoft, Amazon, Apple, Amazon and Apple are up over 9% you can see or 7% for Amazon 9% for Apple, 12 for Microsoft. The reason I bring these names up is because of their weight

on both the NASDAQ and the S&P 500. If tech does well, you tend to see the same outcome on either indecasy. And here, what I mean by that is the weighting on the NASDAQ 100 of these large-cap names like Amazon, Apple, Microsoft.

You can just see Amazon, almost 14%, Apple, 12%, Microsoft 12%. And then down here, I added Netflix in just for context. You can see it's just over 1%. So a huge discrepancy. And when we see either of these names go up,

the NASDAQ tends to follow. And then it's a similar situation also with the S&P 500, given tech accounts for at least 27% of the S&P 500, compared to energy, which is not even 5%. Apple, again, has the largest weight, 7%. Amazon's up there, Microsoft 6%. But same situation. When these names tend to do well,

you tend to see some of the movement happening on the S&P 500. And clearly these indices, the S&P 500 and the NASDAQ, have a weight problem and something to keep in mind when we talk about market swings. We'll give them some osempic, right? So that was a joke that we talked about upstairs. I didn't put it in my script. But yes, we're on the same page. Leave it to me. Leave it to me.

Christina, thank you. All right, let's take that up as our first topic in today's tech check. And that would be the weight problem. Yes. Not mine. Not mine. Speaking for a friend here, my friend the S&P, these tech stocks are, so they go, so go the NASDAQ 100, so goes the S&P 500. Especially Apple and Microsoft, right?

And look, what we saw last year, all these names took it on the chin, fell, you know, especially meta, what fell 50, 60 percent last year, Apple a little bit better. But they took it on the chin. They showed their cost cuts. And by the way, cost cuts aren't done. We've seen second rounds of layoffs at names like META. and so forth. And who knows? Google could be next. Apple still has yet to do mass layoffs. They may be able to lay on the plane without doing it. So they're giving investors what they want in the first hand. And then, as our Bob Bassani likes to say, there's this belief out there that if the

Fed pauses, that's just going to inject a lot more rocket fuel into them to grow even faster like we've been seeing the last decade. So this is going to be likely for the NASDAQ 100, the second best quarter in more than a decade. It doesn't feel that way. Why don't I feel it's as good as it is, number one? Yeah. And or is that partly because a lot of the gains were backloaded? They came in the last three weeks. It came in the last three weeks.

But no, it's been happening since the beginning of the year, too. I mean, it's not just March has been incredible for these names. Don't get me wrong, month of date. But it's been the story since January 1 of this year. And again, it's because they took such a big hit. I mean, Apple was a $3 trillion company at the beginning of 2022. It has yet to reach those all-time highs again. So, yeah, there's still room.

There's a belief out there that there's room for tech to grow. There's also the idea if the banking crisis, you know, rears its head again, that these are the safer names to be in. So that's another thesis going on here. Well, and these two are not exactly going, yay, kumbaya, we're the two biggest, best companies are really at each other's throats these days, meaning Apple and Microsoft. Yeah, Apple and Microsoft, and even Google and Microsoft even into a bit.

And I know we can talk about this is this cloud complaint going on in the EU. So basically this is Alphabet versus Microsoft. Correct, yeah. And so basically what happens here is if you can't win, you go to the EU and complain. We saw this with Spotify. They went and complained about Apple Music. They complained about in-app payments. And basically, because EU regulators are more amenable to making changes versus what we see here.

And our lawmakers and regulators. So I was not surprised to see that Google was complaining about. the cloud dominance of Microsoft overseas in Europe because they have these packaged deals. They can sell to enterprises, say, we include all the office apps, we include this, we include that. Google can't do that. And so now they're putting forward this antitrust claims. Hopefully, you know, they want to pull a Spotify here and think they can get some movement there overseas because they're not going to get it here. Interesting.

Let's talk a little bit about EA laying off people. What's going on there? More efficiency. More efficiency. But look what we saw last. year, Tyler. So I'll go back to Restoration Hardware. I know this is not a video game company, but yesterday Restoration Hardware told us the pandemic boom was a fluke. That fluke is over now. We saw this, and that is what we see in gaming as well. Last year, the holiday quarter,

gaming was significantly down year on year because people are getting out there. They're spending on different things. E.A. in particular, they had to delay one of their big Star Wars games. Don't stuff me in a locker now for talking about Star Wars and geeky things like that. But that's a huge money maker for them, and they had to push it off until next quarter. So that's one of the things that's going wrong. And again, just like we've seen from every other company with these layoffs, it's efficiency, efficiency, that's what investors want to see. They want to see cost cuts. Yeah, although you wonder, again, there's kind of the cost cuts that take the company back to its kind of pre-pandemic size. Then there's the cost cuts that maybe go beyond that. Most of the time,

what we're learning so far as companies, in some ways, even with the big cuts, slowly going back to what they were pre-pandemic. I don't know where on the spot. spectrum EA now falls. Yeah, but here's the thing. You also got to look where the cuts are. So EA, it sounds like they're being really strategic here, and only, you know, they have their hands and everything. They kind of backed off some of their mobile gaming thing, which was interesting.

So it sounds like that's where a lot of the cuts are. They want to focus on these big, what the gaming companies need more than anything, a great mobile business. That's why Microsoft wants to buy Activision, but also these big key blockbuster titles. And if you can't deliver those on a regular basis, you're going to get punished. And that's what happened to them last evening. It's like the theatrical model. It really is.

Why do they want to be in that business? It didn't go. It went well for a little while. It's very much a hit-driven business, just like the movie businesses, absolutely. All right, sir. Good to be with you. Yeah, thanks. I'm going to see you later this evening all right at our tech summit.

It's going to be fun. Tech Executive Summit. Good to see you. Must have lost my invite somewhere. It's coming. It's in the mail. You can join. I'm inviting you.

All right. next guest raising the caution flag on the tech run, saying tech investors need to be careful of stretched valuations. Let's bring in our friend Sirot Sethi, managing partner and portfolio manager at DCLA. He's also a CNBC contributor. That's a lot of letters, Surat. Welcome. Good to have you with us. You think tech is now stretched overvalued? If so, by how much? You know, Tyler, when you look at it, look at Invidia, and these are stocks we own. So we own, you know, We own Google, we own Invidia, we own Microsoft. We actually trimmed InVidia a couple weeks ago.

It's up 83%. The valuations of some of these companies are remnant to kind of where we went back during the pandemic phase. Because investors are saying, we're going to see a slowdown. Let's go back to this playbook. You know, we had some hiccups in the financial sector. So what's safe? And yeah, these are safer companies. But when you're trading at Microsoft in the high 20s, same as Apple, it's going to

going to be hard. You're going to crowd out other investments, and I think that's where you have to be very careful. We do own them, but not in the size of the S&P. And I think if you've made some profits, there are other areas in the market that haven't performed. I mean, five stocks in the S&P. I feel like this is, you know, deja vu all over again, that are riding the S&P when you've got 490 stocks or so that are flat to down for the year. So I guess when you say the valuations are stretched, you cite NVIDIA, which has come back dramatically. 83% you say. Boy, they must have been super stretched three years ago. I mean, compared with where they were. Well, yes and no. I mean, they've also, you know, they've had earnings growth

in the last couple of years. It's just the multiples that came back down and now they're going back up again because investors are looking at that and saying, hey, you know what, if we're going to have a slowdown, these are going to be very defensible companies. I don't disagree with that the fear that we have is if we are in a slowdown coming in, you're going to see advertising pullback. You're going to see corporations pullback, the consumer pullback. These companies are not fortresses that are not going to, you know, again, I'll go back to the pandemic world. We're not going to be ordering more online. We're not going to be sitting at home doing some of these things. You're going to see a pullback across a lot of sectors and then valuation will really

matter. Even if interest rates come down, you're really going to be looking at earnings growth. And that's where when you've got all this competition in the cloud, you've got huge amounts of competition in advertising, that's the issue. And these companies have hired a lot of people. You were talking about how many they have. They're still not back to where they were pre-a-pendemic. So expenses will do it, but earnings are going to be really important. And you need operating leverage. And especially if you see things like advertising come back down, it's hard to sustain 2530 PEs.

So GSK Morgan Stanley, Thread, I know these are a couple of names you're looking at. And two of the worst performing sectors of the year, down 6% year-to-date, those sectors, at least broadly speaking. So why do you think GSK can start to work now, although I can't speak to its year-to-date performance? And Morgan Stanley, in light of obviously the headwinds in the banking sector, why is this a name you think people should take a look at? So let me take GSK. So GSK spawn off their consumer business, trades at less than 10 times earnings. They have a huge pipeline of vaccine drugs. And again, in the pandemic, we didn't really focus on that.

The FDA was not looking to approve many of those. So that's a pipeline that's coming through. They've got some good drugs in HIV, a solid balance sheet, 4% yield, a secular grower. When you look at Morgan Stanley, a very different puppy than the rest of the big banks. They are not a big deposit bank. 10% of their earnings are less from net interest income. 60% is wealth management. They are going to be a big beneficiary of assets moving from some of the smaller banks.

They have a huge focus on return of invested capital. And the part that we haven't seen at all, which is capital markets activity, M&A, they're one of the big leaders in there. So again, trading at 11 times earnings, almost a 4% dividend deal, a very solid balance sheet, and they don't have that issue about deposits moving because most of the deposits are consumer deposits, and a majority of them are FDIC insured. So that's a bank where you're looking at. It's much more of a different bank than you are looking at, you know,

a other regional bank that is susceptible to kind of some money moving from depositors. Surat, always good to hear from you, sensible and understandable. We thank it. Thank you for that. Surat Sethi, appreciate it. Good to see you guys. You too. Coming up, Palace Intrigue at the Magic Kingdom,

how Disney's Bob Iger is giving Florida's governor the runaround And crypto's comeback continuing. Bitcoin briefly getting above 29,000, its highest level since last June. We've got the details when Power Lange continue. Welcome back. The battle between Disney and Florida Governor DeSantis has taken a new twist. CEO Bob Iger seems to have found a way around the governor's major power move. Let's bring in Julia Borsden now to explain what's happening, Julia.

Well, Kelly, score one for Disney in the ongoing battle between the media giant and Florida Governor Ron DeSantis. What they've been battling over is the special tax district that Disney has had since 1967. This is a district and it has a board that's responsible for the approval of infrastructure projects at Disney World as well as things like trash collection. So here's what happened. The governor's new oversight board is now accusing the previous Disney controlled board of transferring much of the board's power to Disney back in February, including veto powers over improvements or changes in the park, which is more. most essential. Now, Disney defending what happened, defending the agreements that signed with the district as, quote, appropriate, saying they were discussed and improved in open, noticed public

forms in compliance with Florida's government in the Sunshine Law. Now, DeSantis's office shooting back saying that they're going to fight this and that, quote, the new governor-appointed board retained multiple financial and legal firms to conduct audits and investigate Disney's past behavior. So it sounds like, Kelly, that DeSantis' camp will be taking this to court. This is be fascinating to see how it all plays out. Big distraction. I mean, it sounds like this is, let's put it this way, how much is really at stake here? Is it existential to Disney's operations? No, it is not existential to Disney's operations. They've also been planning for this for some time. And ultimately, it's probably cheaper for the state of Florida and more efficient for the state of

Florida to let Disney manage its own trash collection and its own plumbing and the like. So the question is whether it's really in Florida's best interest to take over this. But it seems like when it comes to the important decisions, such as signing off on infrastructure improvements, which is something you have to do a lot in a theme park, sounds like Disney got that power back. So the members of this board, repeat for me, because I'm a little thick, the members of the board were appointed by DeSantis? So originally this was a sort of Disney appointed board or a board that was favoring Disney, but then DeSantis came in and appointed his own board. But what's so funny here is that it looks like back on February 9th, the prior board, the Disney

controlled board, before they handed over control to the new board, they arranged some things to make sure that Disney, the company, did not lose control over the most essential decisions. So what's kind of funny to me is it's been months since then. So it sounds like they're just realizing now that they may have accidentally signed over some powers back over to Disney. And so the governor is as angry as a wet Donald Duck, I guess, you would say here, right? I mean. I will let you come up with the metaphor, but I will say it does sound like he's threatening legal action. But we'll see if it's all been, you know, very carefully papered by Disney because it sounds like Disney know what they were doing here.

Yeah. All right. Bob Iger. Clever fella. Clever fella. All right. Julia, thanks. Coming up.

And April Fool's rush to sell. A new tax on sales of million-dollar mansions goes into effect April 1. So sellers are kicking into high gear to close deals by Saturday. Plus, trickle effects of the regional banking crisis could have caused a major slowdown to hotel construction? We'll be right back. Welcome back to Power Launch, everybody. Markets in the green, but off the best levels from early. earlier this morning on this next to last day of the first quarter.

Let's go to Bob Pisani at the New York Stock Exchange for more. Bob. And we have started at the highs for the day right at the open, have been drifting lower, and the primary problem has been financials. Now, remember, regional banks have had a great week rebounding off of 30% drops in the middle of March. However, late in the morning, all of that started reversing. So Key Corp, M&T, Zion, Comerica, these are. the usual suspects and the regional banks, all were up at the open and are now trading down. They are still up for the week.

They are still trading towards the higher end of their recent range in the last couple of weeks, but they've lost a lot of their energy. The volumes here are much, much lower than they were even a week ago. Some of this perhaps maybe due to the fact that Schwab was down today, maybe not. Maybe they just ran out of steam, essentially. But that's the essential point for understanding what's going on in the afternoon. The other thing is the longer term trend, I mean for the weekly trend, and that is a real noticeable move up in some of the cyclical names. So, for example, industrial stocks, airlines have had a very good week.

They have not been good performers this year or this month. But most of the big names, Delta, Southwest, Alaska, United, they're up 5, 6, 7 percent this week. That's a pretty good performance. That's certainly a nice move up. Then other cyclical names, consumer cyclical names, Ford and GM, not a good. year, but they too, up five, six, seven percent, and other deeper cyclical names are the material names like Mosaic and Freeport McMoran. Those are the two general leadership stocks in the material group, also up five to seven percent. So there's a little bit of rotation going on that I think is

very healthy. I didn't mention tech. Of course, they have been a leadership group, but nice to see the advanced decline line moving up after several weeks of moving down. Chart of the week, it's one thing. You want to understand what we've gone through in the last few weeks? There's a lot. the VIX, started at 19, the 1st of March, went to 30 in the height of the banking crisis two weeks ago, round back exactly to 19. Kelly, back to you. Wow, Bob, thank you. Let's get to the bond market. Now we've had economic data. What's going on, Rick Sandellie? You know, I find it fascinating every Thursday morning, of course, look at initial continuing claims. Because first of all, we're all assuming that whether it's seasonality or whatever other variables may be impacting

certain data points that they're spot on. Maybe in a year from now, when we look back, there's going to be a variety of issues that might have put some of those numbers off their GPS. But it is all we have to contend with. And we had another week where below 200,000 on initial claims, below 1.7 million on continuing claims. And as you look at a two-year note chart, you could clearly see at 830. Yields popped a little bit. How much does the market pay attention to this? Well, pretty closely. If you look at a two-day-of-two-year, the high yields, today are above yesterday's high yields, and we're still hovering in the thick of the range.

Now, let's go to the furthest end of the yield curve, down to a 30-year bond. And you can see its two-day chart is completely different. Yes, it reflected the 8.30 Eastern slight rise, but all in all, it never came anywhere near yesterday's high yields, and indeed, we have traded below yesterday's low yields. This really does underscore the dynamic the Fed has to deal with, and all the issues of the banking

have pushed yields down in the short end, but they're still much more buoyant in general than the long end, curves re-inverting. And finally, if you look at our yields versus 10-year boon yields overseas, the difference in yield is the closest it's been by about eight basis points away from the closest it's been in nearly three years. That's something to pay attention to. It will affect capital flows, especially now that we're closer to the end of our tightening cycle.

Kelly, Tyler, back to you. All right, great point. you. A new tax on ultra-expensive home sales has the wealthy racing to sell their mansions before the start of April. It's always something. Robert Frank is here to discuss. And is this in any particular place or where? It's Los Angeles. And you say there's always something. It's California. There's always a new tax around the corner. This is a new mansion tax. It's a tax that was actually passed by voters in November goes into effect on Saturday. And basically, it's a 4% tax on any home you sell that's valued over $5 million, $5.5.5% tax on any sale over $10 million.

So you can imagine a lot of homes in Bel Air, Beverly Hills, Pacific Palisades, they're way above that mark. So these sellers and the brokers have been racing, trying to do anything under the California Sun to sell these things. One of them is a home in Beverly Hills, $16.5 million. They're throwing in a brand new Bentley or Aston Martin or McLaren if you pay the full price and close by Saturday. There's another home that we show. It's in Bel Air, $28 million. They're paying a million dollar bonus to any broker that will bring them a buyer and close before Saturday. So people really want to get this done.

If you sell a house for $20 million, you're paying a tax of $1.2 million on that sale. So it makes sense to get a deal now, especially because this already was a weak market, the high-end market in Los Angeles. They saw sales decline 50% in the fourth quarter. So it's already a tough market without the tax. Sales down 50%. Is there an explanation for that? Is it inventory?

What is it? People just aren't buying? It's all these wealthy people that have a lot of money in venture capital in the stock market and they just want to, they're sort of pulling back and they want to wait for prices to settle down. They're cash buyers. They're not mortgage sensitive. But they see what's happening in the asset world and they want to wait for prices to come down. Fascinating.

They should go to one of those auctions you were telling us about it. Yes. And then they would get it even cheaper. It's interesting that they're so obsessed because, like, in your example where, okay, maybe the tax is $1.2 million, but they're going to pay a broker a million dollars to offload it. So all of this to save $200 grand? Well, it was interesting. Mark Wahlberg sold his house for $55 million in February, avoiding the tax. But that was a $32 million price cut. Obviously, that's 10 times the tax he would have paid. But people get crazy. They'd actually

rather take a cut in the price than pay that tax. They really hate the tax. I'll throw in a Exactly. Just to avoid the tax. That's amazing. It has to have ramifications too for the economy and for the tax space more broadly, I imagine. It does. And that's the point that people are waiting to see. Does it cause more people like Mark Wahlberg to move out of the state that are already, so this is the last straw. I'm already overtax. They feel this is this money is supposed to go to help the homeless problem, unclear how much it's going to raise and whether it does actually fix the homeless problem. So a lot of people, they expect brokers are saying a lot of people are going to leave California because this is it. They just say, I'm already. Enough. I'm already taxed enough. And he homes, you could put people in and solve two problems at once here. Robert, thanks. Robert Frank. All righty, let's get to Bertha Coons now for a news update. Bertha. Hey, Tyler, thanks very much. Here's what's happening at this hour. A federal judge in Texas striking down affordable care act provisions that require health insurers to provide some free preventive care services. Now, the ruling could jeopardize coverage nationwide for over 100 million people. Those relying on those preventive

services like screenings for cancer, as well as HIV prep drugs. Judge O'Connor has issued a number of rulings targeting Obamacare in recent years, many of them winding up back into the Supreme Court. The Federal Reserve and the Treasury Department are finding Wells Fargo nearly $100 million for violating U.S. sanctions. Between 2010 and 2015, Wells Fargo allegedly allowed an unidentified foreign bank to make prohibited transactions on one of Wells Fargo's platforms. The foreign bank's trades involved parties in jurisdictions subject at the time of the transaction to sanctions regulations. And the Navy's Blue Angels arriving in Lakeland, Florida for one of the largest aviation conventions in the world.

The aviation squad roared into Linder International Airport and are preparing to put on a number of practice shows and demonstrations over the coming days at Florida's Sun and Fun Convention. Always amazing when you see them fly over. Tyler, thank you very much, Bertha Coombs. Ahead on Power Lunch. Hitting a Wall Street bonus, hitting a Wall Street bonuses falling by 26% last year, according to a new report. New York State's controller will join us next to discuss that and the impact on tax revenues. Plus, the Yes Network, in a streaming service to give non-cable viewers access to Yankee games. We will talk the state of streaming when Power Lunch returns.

Aaron Judge already has a home run. Welcome back to Power Lunch. Bankers responding to proposed regulations. Steve Leesman has that news. He joins us now from Washington, Steve. Tyler, thanks very much. Just before the 2 o'clock hour, Kayla Tauchy came on with information from the White House about changes they intend to pursue in response to Silicon Valley Bank.

Those changes include rolling back some of the alterations to the Dodd-Frankville that were made during the Trump administration. But the Bank Policy Institute, which represents some of the biggest banks in the country, has a statement from its president saying, quote, it would be unfortunate if the response to bad management and delinquent supervision at Silicon Valley Bank were additional regulation on all banks that would impose meaningful costs on the U.S. economy going forward. The Fed has barely begun its promised review.

This is a strong feeling of ready fire aim. So, Tyler, a very strong response from a banking association there to these proposed changes, which come, as indicated in that statement, before the Fed on May 1st and the FDIC on the same day, are scheduled to put out their reviews of just what happened. Kelly? All right. Thank you, Steve.

Steve, thank you very much. Steve Leesman there. Now, Wall Street bonuses are meantime taking a hit as rising rates and recession fears have caused lower profits. And that was before this year. Some new numbers out today have the New York State Controller's Office showing 2022 bonuses down 26 percent from the year before and returning to pre-pandemic levels. Here to discuss as Tom DeNapley, New York State's controller. And it's great to have you here. Tom, Tom, welcome. Thank you, Kelly. Great to be with you. So this is always kind of a weird one, right? Because are we supposed to be cheering for, you know, ever higher bonuses when, you know, a time of inflation and end people suffering? Or do we say, well, but, you know, the economy's dependent on it and it'd be worse if they weren't up there. So I'm just curious what's your overall read on this. Well, it's a little bit of both. Of course, here in New York, we depend on the securities industry and their profitability to contribute to our tax bank, both for New York City and obviously for New York State. And really, no surprise. the average bonuses are down. Still 176,700. That's a pretty good average bonus. And as you point out, although it's down significantly compared to last year,

you know, last year the bonus pool was really at a record level. And we indicated then we probably would not see that continue. And we are back to pre-pandemic numbers. So, sure, it's a negative. That'll have an impact, obviously, on revenues. But I would also point out that was anticipated. both in projections for the state budget and for the city budget as well, that the bonus pool would be down. So I don't see any immediate impact in terms of our financial place.

So you knew it was coming. You forecasted for it. I assume the forecast roughly match what the results have been. But how much is the revenue, let me call it shortfall or change year to year. Do you know? Well, well, in terms of the bonuses, the average was like $200, 40,000 last year. In terms of the overall contribution when we talk about Wall Street contributing to the state revenues, it's up to about 22% of our total state revenues. And keep in mind, that's all taxes. So it's not just the bonuses. That's only a piece of it. So, I mean, bottom line is, you know, we'll be okay with this turn. The question is the volatility is we move forward. But it's a, but the point I'm driving at, obviously, and I think we would agree on this,

it is a meaningful thing for you and your revenues that bonuses are down and down as much as they are. Yes, yes. But again, it was not unanticipable. Got it. So the broad question is, as we go through the year, overall profitability and secure this industry. What will be implications of interest rates, inflation, volatility, coming out of the banking crisis, hopefully we're coming out of it. What will that mean for the rest of the year? Can you, Tom, tell us about two really important kind of trends right now. Number one, how many people are back at work? How many people, you know, how many offices still have a high percentage of vacancies? And do you see any change in that trend? Are you going to exert any pressure from, you know, from state office? And number two, what about people who have relocated in many cases elsewhere during the pandemic? Do you hear, observe, see any of those firms or people coming back, or do you think they're gone for good? Well, keep in mind the numbers that we're tracking, we actually have an increase in Wall Street jobs.

So I think the issue there is that when you look at for New York City's percentage of the securities industry jobs, that's where we have a smaller percentage that we did 10, 15, 20 years ago. So it's not that we're losing headcount, but certainly as a percentage of the national securities industry, our percentage has been going down. So I think what that suggests of new jobs being created, many of them are being created in other states. So that's a concern. But again, I moderate that by pointing out the employment numbers actually have been going up year over year. What decisions are being made as we move forward? You know, that's a fair question.

There's no doubt that, as we all know, the workplace has been imagined. space is going to be affected by this. These jobs generally have a higher percentage of return to office employment than other sectors. So that helps fuel spending across the city and by extension. I want to squeeze in one final quick question, if I might. What has happened to New York state's borrowing costs as interest rates have gone up? Are you having, is the state having to pay more on its bonds? If so, how much? Is it means? meaningful, is it a meaningful amount? You know, in terms of current bars, I haven't seen a meaningful impact as yet.

Obviously, it's something we're going to have to pay very close attention to. I think the challenge on that score overall for New York is that we're one of the most highly indebted states and the nation. And I think that's something we need to address. We've actually advanced a specific proposal on debt reform for the state. So I think New York has got to do a better job of capturing how we manage debt. We have a statutory debt cap that is rendered virtually meaningless with the way it's always set aside. So debt is one of those issues, especially as we get into more in certain economic times, New York has to do a better job in that issue.

All right, Tom, thank you very much for being with us today. Tom DiNapoli is the comptroller of the state of New York. Thank you very much. All right, coming up, a true trickle-down issue. The crisis in regional banking weighing on investors' minds still. We've seen the slowdown in REITs, less lending. less construction, could this hurt the hotel sector? And as we had to break, throughout the month of March, we said, there are just two more days here.

We celebrate women's heritage, sharing the stories of women leaders in business and those of our CNBC teammates and contributors. Here is Suzanne Shank, Siebert Williams Shank, president and CEO. Finance used to be the ultimate Boys Club, but my career trajectory to CEO, of a successful investment banking firm proves how far women can go when past leaders paved the way. One icon who has blazed trails for all women on Wall Street is Muriel Seabird, the first woman to own a seat on the New York Stock Exchange, and someone who played a huge role in women's empowerment in finance. I was fortunate to have her as a business partner

and mentor for many years. As a Jewish woman on the Stock Exchange, and an African-American woman on Wall Street, we shared a kinship in our understanding of what it's like to fight to the top and of the need to change the stakes for those who came after us. Welcome back. The effects of the regional bank crisis hitting real estate, specifically hotel construction.

Sima Modi has more on this very interesting aspect. Seema. Tyler, hotel owners we spoke to across the nation say regional banks are tightening their reins on new loans. Here's DePriz-Covall, the owner of 20 properties. in Texas. Acquisitions become much less likely because now you can't justify the cost that debt now causes for your project. So those are much less likely to underwrite and become feasible.

The hospitality sector has been challenged by higher interest rates and the increased cost of capital. Analyst at Truist writing that a slowdown in construction spending would hurt the big hotel brands, their development pipelines as they focus on growth, Well Spargo downgrading two launching reits today, Park Hotels and Zinia, writing that it's clear that liquidity is weighing on investors' minds following the failure of SVP, the both of these stocks, underperforming the S&P 500. Now, a number of new hotels in planning already down 16% this year compared to 2022. And I'll say fewer hotel openings could also lead to even higher prices for consumers. Check this out. The average daily rate has already risen about 64% over the past year.

16 a night, guys, but again, it could go up even higher. Wow. There you go. Inflation, still in travel. That's true. Seema, thank you very much. Seema Modi. Meantime, a whole new ballgame, sports networks and leagues betting more and more on streaming with Yankees Yes Network being the latest player to make a big move. We've got the details next. Welcome back, everybody. Dom Chu is so excited to look at apartment rents under his microscope today. And this is pretty shocking, Dom. Okay. So what it comes down to you right now is this notion. I'm going to walk over to the desk right now because the graphics that we have are not working, and so we're going to have to take them full.

So what we have are rent.com statistics about month-over-month rent moves. And it turns out we had, in the most recent period that they track, a quarter of a percent decrease nationally. So five of the last six months, we've seen national median rents fall. Again, fall. And they hit a peak back in August of last year. The curious part about this whole process right now is, I'm going to show you in the graphic the biggest metro area rent increases.

So the places across the country where you are still seeing, and of course they did. Let's just look at those first. Okay, we'll look at the decreases first. Please don't cycle through this producers because I want to talk to this, okay? The biggest rent decreases are in places like Minneapolis, St. Paul, Phoenix Chandler, Arizona, Austin, Texas, Oklahoma City, and in New Orleans. So some of the biggest rent decreases are, there. If you look at some of the biggest rent increases that we've seen, there are in areas

that you might suspect still demographically or trend-wise have seen people migrating to them from the pandemic, right? So we're talking about places like Charlotte, North Carolina. Raleigh was up there. And that's a great spot. You and I tie because Pinehurst is about an hour away from Raleigh. But also with the takeover of SVB, a lot of people are making that kind of joke lately about, hey, Raleigh is kind of overtaking Silicon Valley. Well, it's not just that. Cleveland and Milwaukee. Correct. And Milwaukee, Waukesha, Wisconsin, also one of those ones that's a pretty big rent increase.

So, but just to be clear, a lot of people will say, no, no, no, no, Dom, this rent thing I looked at is still rising. There's a lot of different ways to slice and dice the rent data. Correct. We are seeing no matter which one you choose in Metro usually should be a little bit more high beta. We're definitely seeing more downward pressure lately. Downward pressure, and what it does is might continue a trend that we're seeing in other parts of the market, whether it be in commodities or elsewhere that might show signs, hopefully. that people are not going to be facing pricing pressure like they were over the last year. CPI could be headed sub four, maybe even tomorrow.

Tomorrow, big date tomorrow. Maybe not tomorrow, but soon. There you go. Dom, you are a absolute trooper. My pleasure. Our Dom Choo. The Yankees are getting fans to watch Aaron Judge Home Runs a new way. Could it be a new lifeline for cable networks as well or another sign of their demise? That's next on Power Lounge. The New York Yankees kicking off a brand new season of baseball right now, and fans have a new place to tune in and watch the action. The Yankees Television Home, the Yes Network, owned by the Yankees, launched a streaming service for local fans, making it the latest name in sports to offer viewers another option beyond their cable service. Fans may like the move, but is it just another push to make cable TV a thing of the past?

Let's discuss that and more with Wall Street Journal reporter Joe Flint. Joe, welcome. Good to have you with us. I'm wondering here, maybe this shouldn't be the first question I'm going to make it so. when the Yes Network does this, does this get them in hot water because they've got lots of other contracts with multi-system, multi-channel cable companies, whether they're owned by Comcast or whomever. How does this deal square with their existing contracts? Well, they price the streaming service at a high rate. I believe it's 2499 a month for the Yes, the Yes Network. direct-to-consumer option. So that's the needle they have to thread here, because to your point,

they don't want to alienate, Comcast, Spectrum, all the people that carry, yes, at the same time, they want to reach cord cutters, but they can't undercut their primary distribution methods, which is why you see a price tag that for some might seem a little on the steep side of things. It does seem high. I think it comes out under the Yes Networks plan for, what, $240 a year to watch. I guess it's the WNBA Liberty and the Yankees and I forget who else they have. The Nets. They have the Nets as well. That's a lot if you have other subscriptions. It is a lot. And we're seeing this more and more though. MSG Network did the same thing earlier this month. And theirs was $29.99. And they, of course, have the Nicks, the Rangers, and the Devils. And it is going

to be this challenge. If you're a heavy sports fan, but don't care much about it. the rest of entertainment, then maybe it makes economic sense. But I tend to believe that most hardcore sports fans are also the ones sticking with the traditional cable bundle because they have all those regional sports channels. Joe, I might be connecting the wrong dots here, but what, so we know the regional sports networks are effectively being wiped out. What happens to, for instance, regional news channels? I don't know if this all plays in the same ecosystem, but it just feels like there's more dominoes that will fall from this than just, you know, hey, a few games can now be found on a different platform. Well, certainly to your point, the regional sports network business

is under pressure, the largest operator of regional sports channels. Diamond Sports Group filed for bankruptcy this month. They are struggling to make payments to keep their deals with channels on the air and they want to renegotiate those deals. Local news channels might be in a little bit of a different bucket just because they don't have the cost structure. These regional sports networks pay a lot of money for those rights. And if they can't make those payments, then obviously it becomes a problem also for the teams who rely on that money to meet their payroll. So it's much more complicated on the sports front. But every cable network is under pressure from cord cutting, to be sure. How big an advantage is it for the Yankees that they are the owners of their own

sports network. Many teams do not have that at all. That's very advantageous. That's basically what allows the Yankees and their partners, which includes some small companies you may have heard of like Amazon and Redbird Capital and Sinclair Broadcast Group, the flex to be able to do that versus other teams who don't have their own channels and work with companies such as Diamond or Spectrum in in New York, the Mets Channel, and that creates more headaches, more negotiations and everything to be resolved to go down this road. Fascinating. Yeah, fascinating stuff.

They're playing our music there, Joe. Thank you very much. We appreciate your time today, Joe Flynn. And thank you all for watching Power Lunch on this opening day for baseball. That's right. Closing bell starts right now.