Power Lunch - Tech Turnaround, and Keep Talking 7/10/23

Episode Date: July 10, 2023

The Nasdaq is on pace for its 4th straight down day. Can tech stocks continue their first half rally as the Fed keeps tightening, and slowing the economy as a result? We’ll discuss. Plus, Janet Yellen just wrapped up her trip to China, which she called productive. Is the prospect of more talks enough reason to be optimistic about the U.S.-China relationship? We’ll explore. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch alongside Kelly Evans. I am John Ford. Coming up, the NASDAQ, it's about flat right now. Could be its fourth down day in a row or could break a negative streak. Can tech stocks continue their first half rally as the Fed keeps tightening and slowing the economy as a result? Plus, Janet Yellen wraps up her China trip, which she calls productive, but with nothing concrete to show for it, is the prospect of more talks enough reason to be optimistic about the direction of the U.S.-China relationship? Kelly? First, John, thank you. Let's get a check on the markets where the Dow's up 182, a half percent today, but the S&P's only up five at 4404, and the NASDAQ, as of right now, is down three points.

By the way, Russell's small caps up more than 1% today. Keep an eye on that. Also keep an eye on Carl Icon, trying to fight off a short seller. Icon Enterprise is renegotiating some loans to remove risk from the company. One of the potential problems raised in a report by Hindenberg Research. Those shares are up another 21% to $35 today. Helen of Troy also soaring after an earnings beat. Even though results were lower than last year, the company blamed that in part on Bedbath and Beyond's bankruptcy. A 17.5% pop here for Helen of Troy, helping them stay positive on the year. And Kava is jumping today, as several analysts are able to initiate on the recent IPO, and they're bullish. Morgan Stanley says in the bull case, Kava can be the next Chipotle. That was kind of the IPO case as well.

The shares up 10% today to 4375 they opened, I believe, around 42. Let's talk more about the setup for the market amid this Fed tightening cycle. Michael Santoli joining us with the very latest over at the New York Stock Exchange. Hi, Mike. Hi, Kelly. You know, and it seems the market set up right now requires both bulls and bears to decide what's going to be different this time about that cycle. We all know that that sort of cautionary word about Wall Street history,

never say it's different this time. But it's always different, at least in some detail, and perhaps in the cadence of things. So if you're bullish right now, you're downplaying or dismissing the history that says whenever you've gone down 20% in the S&P 500, associated with the Fed tightening cycle, the market's never bottomed before the Fed was done tightening. You're also probably trying to shrug off the fact that the Treasury yield curve from two to 10 years out has been inverted for a year. That's typically almost always preceded by some length of time a recession. Of course, the leading economic indicators also down 14 straight months.

That also has always been associated with a recession. On the other hand, and I think this is important, bears are ignoring the fact the S&P is up 25% over nine months. That's just way beyond in terms of time, the duration of a typical bear market rally. It's kind of proven all the points about getting above moving averages and all the rest of it. And by the way, on the point about leading indicators,

and Kelly, I know you know all about this, the coincident indicators, what the economy's doing right now is at a record. So every single time you've been down this much in terms of the leading indicators, you have already been in a recession. So maybe there's something structurally going on with the labor market making it sticky at low unemployment levels

with earnings being sticky relative to the past in terms of earnings power because estimates are again starting to bottom out at this point, Kelly. No, this is getting a little weird. It should have kind of been here by now. I don't know what it happens if it still hasn't come. Mike, stay with us. Our next guest is also a little cautious.

She sees an earnings recession coming in the back half of the year. Joining us now is Katarina Seminetti, Senior Vice President at Morgan Stanley Private Wealth Management. So, Katrina, is true. Now we have housing starting to turn up a little bit. And some of the things that turn, you know, when people keep saying, if ISM just gets a little bit better, you know, what then? Well, Kelly, you're absolutely right. You know, when we look at the data that is coming from last week, it has been pretty positive with consumer confidence and housing. And investors are finding it very difficult to figure out how to translate it into the context. of their investment portfolios because they are afraid of this bull market that seems to be counterintuitive because it's hard to believe that the same leaders, the same stocks that led us

into the previous bull market are going to be the same exact names that are going to lead us into the next bull market. At the same time, they're fearful of missing the recovery. And what we're telling them is that they need to stay disciplined, that they need to stay a little bit on the side of caution because the main risks that we've been talking about all throughout this whole year, the inflation that is coming down but perhaps not quickly enough, higher interest rate environment that is here to stay. Now this liquidity crunch that is going to be a pretty major issue for this market are all of the factors that are going to be affecting the market and especially if we look at it from the short-term perspective.

Okay, so, Katerina, give us some specifics in a way. I'm thinking percentages here. What does the new balanced portfolio look like? Say for a mid-career professional, hypothetically, right? I mean, because it seems like it's not necessarily what it was before in terms of large caps, smaller caps, international, and how much dry powder do you be sure to keep in a market like this that's run so far already? Well, John, it's a fair question, and I'll make an argument that a balanced portfolio

hasn't really changed all that much. changed is that now we can actually afford and enjoy being a little bit more conservative. Because if you change the asset allocation just ever so slightly and have a little bit more cash on the sidelines, now we're not sitting in this euro rate environment where this cash is not earning anything, but we actually can enjoy a somewhat higher rate of return in this higher interest rate environment. We can diversify both within stocks and bonds. And what we're telling investors is that they should not misconstrued this message as this invitation to exit stocks.

That's not what we're saying at all. We're advocating slowly and gradually entering the market, looking for buying opportunities, specifically looking for discounted stocks, both from either earnings or valuation perspectives in sectors like healthcare, like energy. There are definitely financials. You know, we are coming out of the financial prices, which, presents opportunity. We are least excited about investing in broad indexes right now, but we are telling investors that they can be a little bit more conservative in life all the risks that the market is throwing at us. Mike, Friday, we start to kick off earnings season.

What are the expectations for earnings for? What would that be the second quarter, I guess? And then, of course, what does the back half look like? Is Katarina right about an earnings recession? Well, the second quarter is going to be likely another year on your decline, but there are indications that it actually could be the trough. Now, if you look at forward estimates, they've just started to bump along flat on a 12-month forward basis. That would mean that we had kind of a brief and shallow earnings recession. I do know that there is a camp out there that says, look, we actually have the reckoning ahead of us in terms of profit margins. And it is also a very concentrated earnings growth story. BlackRock's talking today about outside of Big Cap Tech. It doesn't look like a

whole lot of projected earnings growth from the rest of the S&P 500. But I don't know what that you're in a position where we want to map past tightening cycles and what happened from peak to trough earnings onto this one simply because you do also have, you know, the index is just structurally different. There's a little bit less cyclicality to it. You have these dominant franchises that are earning a lot of them. By the way, every company with a net cash balance is earning 5% on the cash. Okay, that's higher than almost every corporate interest rate out there on an investment grade level. So it's this very unusual combination of higher nominal growth that has helped out revenue growth, along with all the other

stimulus effects that have cushioned the economy. Mike, real quick, what's your take on what a lot of investors are doing now? The nature of a balanced portfolio has changed for a lot of investors, even those that are close to retirement. They're not 60-40. They're way more tilted toward equities. What are the implications for the market here? Yeah, I thought the findings recently that people even close to retirement age are very,

very heavily weighted toward equities. slightly alarming just because it seems that you don't necessarily want to make any huge bets along those lines. People probably are irrationally afraid of bonds after what happened, you know, when we got that big sell-off last year. To me, the fact that you're getting paid a fair, real interest rate on fixed income without taking much risk means it's ballast in a portfolio to take risk elsewhere. You might as well keep the proportions roughly on target. It seems as if nothing has come along to say that that's been invalidated. All right? Katarina, Siminetti, and Mike Santoli.

Thank you. Now, another potential worry for the markets is the prospect of more pain in the banking sector. Hugh Sun writing about that on CNBC.com this morning. He joins us now on set. And Hugh, this is a continuation of what we were talking about back in March post-SVB and the idea that there was going to be necessary consolidation in the regional banks, right? Because their costs are going up. But how is that going to affect, say, the KRE in these stocks?

because they're already still down. They're already depressed. I don't think that there's any real belief that that reflects anything but pessimism about the sector. And it is a pessimistic outlook. The people I speak to basically say this. This sector, particularly the smaller banks, regional banks, it's going to be under earnings duress,

earnings pressure for the foreseeable future. Rates are high and potentially rising higher. We know what that's done. That basically hurts their underwater bonds on their balance sheet, and at the same time leads to deposit flight, right? So when we see second quarter earnings results later this month for these regionals, and I'm thinking of Key Corp, Comerica, I'm thinking of Zions, and these banks in particular, they've already signaled some pressure on net interest margins.

We're going to see basically three months instead of just one month in the one queue of results of basically funding pressure and results under duress. And what does that do over time, whether it takes a quarter or two, There is the concern out there that some of these banks are going to start doing things like cutting their dividends. We all know that banks are very low to cut dividends. They want to do that at the very last resort because it shows, you know, basically a company under duress. They don't want to do that, but they might have to. How much, my question, how much has the Fed helped some of these banks clean up their books over the past several months?

Because that was the talk, is that, okay, now they're going out after SVB and helping out. Is this commercial real estate potential, you know, bomb, really, in a lot of these banks still a threat to go off or might it have been diffused? They've been the doctor, but also the perpetrator, too. They've given them time. They've also given them pressure. So, you know, we know that people like Jamie Diamond have been calling all the regionals and saying, use this time now to fix your balance sheets. But what can they do? Can they sell loan assets?

Pack West has done that, you know, to a lot of the real estate assets. That's taking some of the pressure off. The stock has improved a little bit. For the most part, for them to sell a bunch of loans, they're going to have to absorb losses and hits. And so they're low to do that. They're in a bit of a bind. They can't raise equity.

You know, the long-only players are not buying a nuisance of bonds, you know, of banks because race are still rising. So they're in a bit of a fix, Joan. And so basically people expect, not necessarily this quarter or all in a flurry, but over the next couple of years, dramatic consolidation in the regional banking sector.

And, you know, if you zoom out, it's been the story of banks anyway that they've been consolidating. You know, not long ago, there's 13,000 banks in this country. Now there's 4,600. You know, the people I speak to you, the consensus seems to be cut that in half. So 2,300 banks are going to disappear, swallowed by stronger balance sheet banks in the next coming years. Yeah. And I guess for now, earning season could tell us who might be the acquires and maybe who are the stronger ones that might be the acquires. Because you have to go past a couple of big banks, unless they keep waiving deposit caps,

Is it going to be a top five bank or we're talking, you know, second tier? Yeah. The action, I suspect, is going to be below the megabanks. Obviously, their deposit bases, you know, prohibit them from buying other deposit institutions. So, you know, if you think about it, there was a bit of an arbitrage to make. If you're under 250 billion assets like SVB, like First Republic,

you could skate along with lower federal oversight. And we saw what happened to those institutions. There are obviously closing those loopholes. And Michael Barris talked about that today with institutions over $100 billion getting more oversight. So, you know, there is incentive now suddenly for them, for banks that are $100 billion, $150, $200 billion, to scale up, to buy each other, and to get larger that way.

There's now no longer any incentive to be small, at least in that size, if we want to put it that way. Hugh, thanks very much. We appreciate it, Hugh Sun. Coming up, Treasury Secretary Janet Yellen, wrapping up her China visit. While some call it successful, overall tensions do remain on the precipice.

We'll dig into that. Plus, AI expansion, cloud computers, Firm Digital Ocean looking to make some waves in the space. Acquiring an AI platform will speak with the CEO. And as we had to break, a quick power check. On the negative side today, American Chemical Manufacturer FMC Corp, down 10%. A massive outlook cut sending bears on a victory lap. On the positive side, Ralph Lauren, up 5%.

The stock hitting a new 52-week high. Power Lunge is back after this. Welcome back to Power Lunge. Janet Yellen, fresh off her high-stakes trip to China, where she pushed the message of diversifying, not decoupling the world's two largest economies. But the Treasury Secretary has a specific idea of just how China should go about that.

Importantly, I believe that a shift toward a more market-oriented system in China would not only be in the interests of the U.S. and other countries, it would be better for the Chinese economy as well. And Yellen's latest push comes at a time that the country is showing major signs of economic weakness and even approaching the brink of consumer deflation. So is it time for China to revise their system?

I can barely ask with a straight face because unless there's a chip, Michelle Caruso-Cabre, CNBC contributor is here now. And wouldn't it be amazing if this were such an opportunity, but it doesn't seem like they would want to seize on that? It seems very unlikely. What struck me about this is, you know, Janet Yellen is no right-wing ideologue, right? She's a Keynesian economist, a labor economist who studied a Brown and Yale. And if she's telling the Chinese government that they need to embrace more market forces,

it shows you just how much they've turned their backs on all the things that they did for the previous 20 or 30 years that actually helped raise their economy and lift so many people out of poverty. We focus a lot on what we are doing to them and what they are doing to us, but we don't often focus very much, I think, on what they are doing to themselves, which is really, you know, very, very sad because, like she said, it would be so much better for the Chinese people. And I don't know. I mean, just what Derek scissors was commenting on last hour, he said, you know, don't think economic stimulus. There's not much they can do. There's not much they're willing to do. Why? My understanding is that they saw what happened in the Soviet Union and they did not like what happened.

With the more market-oriented... When they moved to a more market-oriented system, the Communist Party lost power, and they don't want to lose power. So look at what they did to Jack Ma. They saw that as similar as to the rise of the oligarchs. So Jack Ma and what they did to Alibaba. I know Alibaba's up today because the rectification process may finally be over for Ant Financial,

which made headlines today. Remember, Ant Financial was supposed to raise $300 billion in an IPO in 2020. And now based on the buyback that they're going to do, it's only worth $79 billion. Exactly. I mean, what a tragic loss of what could have been. And they punish a Jack Ma rather than applauding him for creating something that was enormous and amazing.

Unless you're really, as the Chinese government, trying to prevent this idea that you're creating oligarchs, right, and this inequality. That seemed to be some of the rationale behind what they were doing with the education companies and whatnot. So is this the case where market forces in China are now more of a garnish, not a main course? They'll default to that when things are getting bad.

They'll say, okay, we want some more market forces now. Tech go ahead and run. Ant Financial. You're off the hook. But investors should expect them to default back to a clampdown? Oh, I think they're always going to lean on state-owned enterprises, always deciding in favor that a capital is going to go where the government decides that it should go.

We've seen that when you look at the way the Chinese market has moved, anything that's run and owned by the state, those shares have performed far better than anything that was actually fully privately held. I mean, the market investors there have really made that distinction very, very clear. I mean, it used to be that the Chinese market was an investing market. You were going to invest in China because there was a long-term secular growth story there. Now it's a trading market. Now you trade it based on news that comes out for whatever reason, and that's it. And now India, you know, whether or not India will be a good return on capital remains to be seen, but that's where everyone's laying their bets now, whether they're looking to diversify a manufacturing

basis or every time you read an investor survey now, it's like the number one overseed preferred market for the next 10 years. India has a lot of opportunity. Can they do all the things that they too need to do in order to be able to seize what could be theirs, right? Their manufacturing capacity is nearly the same as China for a variety of reasons.

If they could do that, then you can have some real competition there in terms of diversifying supply chains that we so desperately need. Last kind of question slash so Derek Sissor's view was that most likely China's going to muddle through. Do you see the risk that it does get a lot worse from here? Could it possibly get a lot better now that we've all kind of priced in the down scenario? I assume you're talking about the economy,

not necessarily stability, that kind of thing. I mean, it's impressive to achieve deflation in an incredibly inflationary world, isn't it? I mean, they've got producer price deflation. It's happening while we're all fighting inflation, and they're on the verge of consumer inflation. Yes, I think it can get worse because they've got so many structural impediments in the economy, whether it's the debt levels, whether it's, you know, demographics that are working against them, whether it's their inertia internally about being willing to allow the markets to distribute capital instead of them. I think it could absolutely get worse. No, deflation was supposed to be a thing of the past, with China being almost case in point and the fact that it's still, you're right, is absolutely

striking in this environment. Michelle Banks. We should talk more about that debt and how quickly it's gone. Thank you. Further ahead. on the show, data harvesting. We'll take a look at an agricultural tech startup that monitors billions of acres of farmland and then sells the data to big food businesses. Plus, we'll take a look at some names with breakout potential in today's three-stock lunch when we come right back. Welcome back to Power Lunch. Let's check on the bond market with that 10-year sitting bang on 4% again. Rick Santelli joining us from Chicago. Big moves lately, Rick. Yes, big moves, but maybe not necessarily the big follow-through many we're looking for,

especially in the shorter maturities, Kelly. Let's look at a three-day chart of two-year note yields, shall we? A couple things to notice. If you look at the last two sessions, obviously including today, we have successive lows. So we're staircaseing lower. Maybe the most important feature of all, though, is on the far left there, you see the intraday high yield of 5-11. Now as you move towards a chart that starts, well, in the beginning of 2005, you can see why that's such an important area. The left side has a double top.

The right side may have a double top. Why? Because we have not had a yield close above 507, and that is technically significant. We all know that in March, the two-year note yield reached that point above 5%, and then dip well down to come back and test it. Intraday, you slice through it like a hot knife through butter, but it's the closes that matter most to technicians. Look at the difference with a three-day of 10 year yields. Each successive session, including today, has a high yield of 408, and yet we're now below 4%. And if you look at the twos versus 10 spread and take this back towards the spring of 2021 when it crested just about 160 base points.

And at the time, that was the steepest since 2015. Look what it's done. It's piled everyone in basically a position looking for flattening slash inversions. It's double bottom right around minus 108, and it certainly seems to be hurting as many, of course, see the two-year-note yield coming down and are reversing many of those flattener slash inverted trades. John Fort, back to you. Yeah, I mean, what a flashing light that is, Rick Banks. Now the trade in oil about to close for the day.

WTI is down about a percent. Let's bring in Pippa Stevens for a look. Hey, Pippa. Hey, well, so I moved between gains and losses for much of the session before taking a solid leg lower in afternoon trading. That does, of course, follow those strong gains last week, which was WTI's best week since April.

It also crossed above the 100-day moving average on Friday, which has acted as resistance. Now, today, there are a couple of things going on. Of course, on the positive side, we have the cuts from OPEC and Russia, sorry, from Saudi Arabia, I should say, and Russia. But on the negative side, we have the left. latest data out of China. The producer price index fell at the fastest rates in more than seven years so that once again speaks to that soft consumer demand, which is really not helping that

bullish narrative. Now moving over to Nat Gas, it is up more than 3%. So a different story today for that market after prices did fall last week. So today's move, likely a combination of short covering after those declines, as well as forecasts for warmer temperatures. And within this lackluster environment, I do think one thing to watch as earning season approaches is production plans for the second half of this year, which we are now in, because actually Rysad had a note this morning saying that they see well intervention spending jumping 20% this year. So in other words, that's squeezing out every last drop of oil from existing wells rather than drilling new ones, which of course is more expensive.

So we shall see production plans. All I know is China ain't back until crude starts popping again. And so we're going to get one of these days finally, it'll happen. Maybe. But it ain't today. Pippa, thank you. Pippa Stevens. Let's get to Contessa Brewer now for the CNBC News update, Contessa.

Kelly, a Kansas judge ruled today. The state must stop allowing transgender people to change the sex listed on their driver's license. The judge cited with the state's Republican Attorney General Chris Kobach. He filed a lawsuit last week saying these changes violate a new state law. That law took effect July 1st and uses reproductive ability to define men and women and a third category of disabled. The Democratic governor insists she will not implement key provision. and reportedly is working on a legal response to the judge's orders here. A landslide in Southern California this weekend ripped a dozen houses off their foundations.

Authorities in rolling hills about 25 miles from downtown Los Angeles say those homes are at risk of collapsing into a canyon below. Local officials say excessive rain likely played a big role in that landslide. And Madonna says she's on the road to recovery after she was in intensive care for a bacterial infection last month. In an Instagram post today, Madonna told her fans she's postponing her celebration tour in North America. It was due to kick off this month, and the singer said she would reschedule those dates and start performances in Europe in October instead. Of course, we're wishing her the best. Kelly. Absolutely. Thanks, Contessa. Ahead on Power Lunch, just to drop in the Digital Ocean, more and more businesses are betting big on AI, but how are all these new players planning to distinguish themselves from the rest?

We'll speak to the CEO of DigitalOcean about that next. And as we had to break, the reveal of this year's top state for business. It's tomorrow. And Scott Cohn has a hint about this year's winner. It is our annual study of state competitiveness. We've been doing it since 2007. Where am I? Here's another top state's hint.

Highlight of my life. Highlight of my life. What does that mean? Read more about our study at topstates.cnBC.com. see where your state ranks tomorrow when we reveal the top states more power lunch continues. Welcome back to power lunch. Cloud service provider DigitalOcean, the latest company to make a big bet on artificial intelligence. The company acquiring paper space, a leading provider of cloud

infrastructure for $11 million in cash to help expand AI offerings. Shares of DigitalOcean are up nearly 80% so far this year. Yancey Spruill is the CEO and joins us now. Yancey, good to see you. So talk to me about this. Things have been tough for SMB. You guys did some cuts a few months ago, but this is a big acquisition at a time when people are talking a lot about AI. Why is it worth all that cash? Well, we're excited about the opportunity to extend our platform to include GPU infrastructure, which historically we've had standard compute, standard infrastructures of service. We've now broadened that, which is going to enable a whole new slew of opportunities and developers and small businesses to create applications to leverage the exciting things happening around LLM and this new extension of the artificial intelligence capabilities in the market. Well, the reason why I think that this is so important to watch, people might not understand what DigitalOcean is or what you do, but you're really providing those IT,

services to smaller companies. And a lot of the use out of AI is going to come from developers within specific industries, finding models that actually allow them to get ahead. So you could be a canary in the coal mine here for where the real value is in AI. Is that why you did this acquisition? And how soon do you think it's going to start to deliver the value that you expect to see here? Yeah, I think you're making a very important point, which is we define. We differentiate in the marketplace by focusing in a purpose-built way our entire slew of IT infrastructure services to people really early in the journey, whether they're individual developers just testing an idea, people launching a startup, just getting a liftoff, or managing a small, medium-sized

business, which for us as business is less than 500 employees. They need help. They need simplicity. They need support. They need the documentation. All the things that we provide that enable customers to have an incredible experience to remove the blockers. Whereas in large enterprises, they have big armies of IT and DevOps people. Our customers don't. We provide that. And I think what that's going to enable is these early stage ideas to get liftoff on our platform combined with Paperspace, whereas I think some of the broader conversation that's been happening in AI on your network in every in the business community is around the enterprise. which is a different use case.

And we're very distinguished in our end of the market. We think we're going to have a powerful set of capabilities to enable this new slew of applications in AI and generative AI. Yancey, before we dive into that, it's Kelly here. And again, thanks for your time. Because you focus on a lot of small and medium-sized businesses under 500 employees, this is kind of ground zero for the economy right now, where they're facing higher borrowing costs and they're facing all of these pressures.

Can you tell us how is that client doing? What is your sense of their condition this year, say, versus 12 months ago? Yeah, it's interesting. I would say 12 months ago, everyone got hit with a shock to the system in terms of the slowing pace of growth. I'd say we're now in a more normalized or a new normal where we're growing slower, but our customers are still growing. They're optimistic. We've put out surveys around that. And we're helping them.

And again, I think our business model really helps customers. who don't have that capability internally, that expertise to better utilize the services, et cetera. So what I'd say is those customers are growing, slower rates, but optimistic. And I'd say it's a much more stable environment where we were seeing deceleration a year ago. I think we're much more in a more stable but low growth environment today. Yancy, we had Amazon CEO Andy Jassy on the network last week making the case for Amazon's potential in AI and really making the case that Amazon's custom chips, you know,

price value-wise, are just as good as Nvidia. Is that true from your perspective? Because you're not going to have the same kind of access to Amazon's chips that you might to the likes of Nvidia, eventually AMD, Intel. How much of an advantage did those companies have and how does that put you in position with paper space to really make progress? Well, again, I think we're, first of all, we think this is a massive market. I mean, the cloud infrastructure market itself is north of $100 billion just for the SMB and developer part of the market that we play in. That's obviously a different market than those of AWS and others play.

And so, but the aggregate amount of money that's being spent to transform the economy through cloud is big. and AI is just going to be additive to that. So I think this is a big sandbox, big ocean for all of us to play in. And, you know, I think our end of the market, I think your point, you know, whether we need this extra special, customized, curated set of chips and capability versus can we leverage, as we do currently through PaperSpace with NVIDIA, we have strong relationships with the others that you mentioned in our core business.

That's been more than sufficient for us to provide a platform. very high performance compute platform that's enabling all these applications. So I don't think that is as big a concern for us in the segment of the market, which is still $100 billion plus that we're playing. Are you more aggressively hiring again versus where you were a few months ago? Well, we've certainly been hiring. We definitely made adjustments, but part of that adjustments was just realigning our footprint to be a more global footprint, but we're certainly adding folks and go to market. We're going to invest a lot in the paper space acquisition. We're investing a lot in the acquisition we made last year and managed hosting with Cloudway. So there's parts of our

business that were focused on optimization from efficiency and an operational excellence standpoint, but there's growth in our business and we're investing in it. Well, it's good to be a public company and be able to say that, not hunkered down. Yancey, good to see you. Good to see you. Thanks for the time. Good to be with you. We appreciate it. Coming up, making hay from data harvesting. We'll hear from a startup monitoring farmland and selling weather and soil info to big businesses. Those details when Power Lunch returns. Welcome back, everybody. Big Tech looking for some greener pastures with the market difficulties of late.

And consumers are seeking out healthier food options. Obviously, all that production can be bad for the planet. That's why the race is on to make farming greener. Diana Oleg joins us with her continuing series on climate startups. Diana? Well, Kelly, it might seem counterintuitive, but agriculture and the overall food ecosystem are responsible for one-third of global greenhouse gas emissions. Growing things is a dirty business, but new technology is now offering both farmers and major food companies like General Mills ways of making it cleaner. Growing all the things we eat is not exactly great for the earth.

It depletes the soil of nutrients and produces harmful carbon emissions. Regenerative agriculture, which reduces emissions and protects the soil, is not new, but technology advancing it is. We monitor 1.2 billion acres on which we observe the adoption of the agriculture practices so we can inform both private and public sector how to act around it. Regrow ag is a science and tech startup focused on both decarbonizing and renewing agriculture. It takes satellite imagery, weather data, government soil maps, and on the ground observations on specific farms, and feeds it all into a computer model that knows how soils and crops behave based on different conditions. Is it good for the environment, good for the water, good for soil health? Is it sustainable? Is it bringing resilience to the farm in the community? The model also offers ways to improve, like composting, specific cover crops and livestock integration. Regrow then sells all that information to customers like General Mills, which has pledged to advance regenerative agriculture on 1 million acres of farmland by 2030.

We source ingredients like oats for Cheerios and wheat for Pillsbury. So we really source from the Great Plains of the U.S. and Canada. We source dairy from the Great Lakes region. And so we really needed tools that were able to model the impacts of agriculture in those places. Regrow ag is backed by galvanized climate solutions, making. Sequence Ventures, M12, Microsoft's Venture Fund, Time Ventures, Rethink Impact, and Cargill. Total funding to date $60.5 million. Corporations like General Mills that are pledging net zero emissions are buying the regrow software

and offering it to farmers in addition to payments for ecosystem benefits. So if the farmer changes the practices on their farm in a way that helps sequester carbon or remove carbon from the atmosphere, they get paid for that carbon and regrow helps to estimate that amount. Back to you guys. Is there a rush into this space? How many different startups are we talking about generally? Yeah, there is definitely a rush into this space because of what a carbon offender it is. In fact, another startup that we profiled in this segment, Indigo Ag, is doing something similar, but they're all using different types of technologies and different ways of getting at it. But this is a huge open space and, dare I say,

a growing space for technology. Not just startups, right? This reminds me of some things that Deere and company has been working on to sort of bundle in with services so they're not just selling hardware and equipment. Absolutely. You've got the mainstream companies that are doing it and then, of course, the startups that are getting into the higher tech of it because, again, it is such a big field. All right. Diana Oleg, thank you. Coming up, 2021 DejaVo, lots of trades working in 2023, but still well off those November 21 record highs. We're taking a look at three names. Our trader says are due for a burst. breakout in three-stock lunch after this break.

Well, it is time for today's three-stock lunch, with stocks moving broadly higher this year. We're taking a look at names that are still more than 30% down from their 2021 highs that our trader thinks might be poised for a breakout as they move above their 200-day moving average. Starting with Blackstone, the finance giant down 38% from its 2021 high, but up 25% year-to-date. Here with our trades is Ari Wald. managing director and head of technical analysis at Oppenheimer. Ari, why should Blackstone move higher? Dry powder? Dry powder. I think this entire list, as we think about stocks still well below their prior highs, I think this next leg of the bull market is going to be driven by rotation into these names.

For starter, here's a stat for you. The S&P 500 is up 28% from last October's low. But if you look at prior bull market cycles coming out of a non-recessionary fair market. So we do want to consider these more late economic cycle conditions. The median gain, even in that environment, is typically from the bottom to the peak, about 60, 70 percent. Even on the more muted side, that full market should get you higher about 45 to 50 percent. The point being is that we do think there's more upside here over the coming year. So we're increasing the beta to our portfolio. We upgraded financial services to overweight, just giving a broadening list of stocks that are reversing their prior decline like Blackstone, which has moved above its 200-day average.

Here's the trade for Blackstone. That 200-day average comes in at around $87. That's key support. The bullish trade is intact above there. I think there's upside into $110 as its stock gets back to some peak levels from last year. Interesting kind of turn there to watch, if you're right. What about in cybersecurity? For instance, crowd strike. It's down, you know, 50% from its all-time highs, but up 40% this year. Are you as excited about this one? We are. And this gets to the broadness of the technology sector. It is not just five, six, or seven stocks. This is probably one of the sectors that are showing the broadest strength across the board. And it's going to be that rotation that drives the sector higher. When one stock pauses, another is going to take over the leadership role. And for rotation, we do like crowds.

strike, which just in June finally broke higher, it moved above its 200-day average, and we think is in the process of reversing last year's decline. So for CrowdStrike, for Traders 141 is the recent low. I'd even give it flexibility down to 132. That's the 200-day average with upside into 205. So I still think there's some upside left in CrowdStrike. All right. Finally, active, the automotive tech company down 40% from its highs, up 16 this year. Are they benefiting from electrification or what? There is, this is a play on consumer cyclicals. I think generally speaking, we want to own technology, industrials, financials, and consumer cyclicals as well. Here's another name that's rated outperform by the covering analyst at Oppenheimer. So you have

the dual tailwinds on a technical basis. The key point is that here to stock. that's just reclaiming its 200-day average, and this longer-term base is occurring at an important level. You go back to the breakout from the fourth quarter of 2020 above the stock's 2018 peak. So the trade here is intact above $100 support. That's the 200-day with upside into 130. I think this stock makes its way back to where it originally started to break down in the early parts of 2022. Okay, so all of this kind of hinges, though, on what the market overall does. A lot of questions about that heading into the second half.

Is there any particular protection that you think these companies have against a downside scenario? It's not necessarily protections that they have. I guess the key point being price momentum, a market anomaly that has shown to pose solid returns over the benchmark looking at various market cycles over a century of data. I mean, the key point for us is that areas that have been limiting market participation, most notably value areas and small caps are just starting to move higher. So as long as that's still the case, as long as the Russell 2,000 gauge of small cap stocks is holding its base, holding its 200-day average, I think the assumption is that the bull market is intact. It's got firepower in these unloved areas to move higher.

And with that said, this 28% decline should start to get to some of those average levels that we led the show with. Okay. We'll watch it. Arii Wald, thank you. Thank you. Still to come, threads taking a toll on Twitter traffic, or is it Twitter self-imposed engagement? We'll debate. And why Disney parks are more empty than they've been in years. It's also a good time to shop for an SUV, those stories and much more. Did I say SUV or EV? It's a good time to shop for an EV.

Okay. It's all when Power Lunch. comes back. Welcome back about three minutes left in the show and a bunch more stories you need to know about. So let's get right to it, starting with Twitter traffic reportedly slowing since the launch of Mehta's rival platform threads. Of course, they now have more than 100 million signups in their debut since last week. That's according to similar web. Twitter traffic, down 5% for the first two full days since threads became available on Wednesday. And it's down 11% overall from this time last year. I think threads is great. I know we have a disagreement somewhat on this.

I mean, early days for something like, it's even got some real-time response happening on there. My engagement to follow ratio is much bigger. But you have to have your phone up to watch this because there's not even a desktop app. Oh, yeah, but I mean, not even. It's brand new. That's like saying the baby isn't even writing essays yet. And you can't figure out who's in your, whatever you call the main page. I can't even figure out how to keep my own thread going or whether I'm responding to other people's threads.

And it's so text-driven, which is odd to me in this day and age. The funniest thing to me about this is the, idea that they'd be copying Twitter. Twitter's a failed social network. It couldn't grow. That's why it went private. Zuckerberg owns Instagram. Just because it's not a great business doesn't mean it's not a great platform. I don't want to throw the New York Times in there.

But I'm just saying, you can have a great purpose without necessarily being that profitable. Although I agree, some of their self-inflicted wounds lately in particular, pretty shocking. Yeah. Wall Street Journal investigation found the old Mobbell phone network left behind miles of lead-covered cables across the country, including underwater and soil and also overhead utility poles. And while the government has spent years eliminating lead and drinking water, gasoline, and

paint, these phone cables have yet to be addressed. AT&T, Verizon, and others responded to the report by saying they don't believe any cables in their ownership are an immediate health threat, but they take the issue seriously. They're also ready to engage constructively to address it. This is really important as a finding for these stocks. It could be, I mean, dealing with lead and its removal, if towns, if municipalities know now they can go to these companies to maybe have some skin in the game is a hugely, a huge development.

Let's just put it that way. The shares these companies down about 2% today. So not huge in that sense, but this could go on for years. Also, add this to the list of problems facing Disney, sparse crowds at the theme parks. They've already said they expect weaker U.S. park revenue this year. They're offering discounts on hotels, even around Christmas. And companies analyzing wait times on rides,

say the slowest July 4th week we just had in nearly. a decade. I'm shocked, truly. Clearly it's because they're all on threads. No, I think they're all in Europe. I mean, the hypothesis is everybody's overseas, but I'm like, I'm not sure how much overlap that really is with the kind of people who would have visited Disney in 2019, 2015. I don't get this one at all.

All right. Evie's slow adoption or car dealers ended the second quarter with more than 92,000 electric vehicles on lots. A year ago, they had 21,000 according to Cox Automotive. Car dealers nationwide had on average 51 days worth of new cars to sell. Good time for a deal. On an EVSUV.

Yes. If that's what you want. John, thanks for joining us today. Thanks, everybody for watching Power Lunch.