Power Lunch - The case for a 100bp rate hike, Jay Leno’s conversation with Elon Musk and smoother sailing for cruise stocks? 9/20/22

Episode Date: September 20, 2022

Nomura’s senior economist makes the case for a 100-basis point rate hike by the Fed tomorrow. Plus, Norwegian cruise lines is upgraded to buy. Why the analyst behind the call says Norwegian has an advantage over its rivals. And, Jay Leno’s conversation with Elon Musk. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome everybody to Power Lunch. Glad to have you with us. I'm Tyler Matheson along with Sima Modi. So here's what's ahead. Historic hike, Nomura's senior economist, calls for the Fed to raise rates by a full percentage point. He will make the case for that as the divide grows over what the Fed should do tomorrow. And then we're going to hear from, yes, power player Jay Leno. He is with us live from his garage. He met up with none other than Elon Musk, someone he calls the greatest innovator of the United States. all time. He'll tell us what they discussed about the future of cars and Seema space travel. Looking forward to that, Tyler, less than two hours left in trade, and stocks are near the lows of the session ahead of tomorrow's key Fed decision. The Dow is down 524 points, about 1.7%, S&P 500 lower

by a similar amount, and the NASDAQ down about 1.6%. Bucking the trend is shares of Humana, which is hitting an all-time high right now. The stock getting upgraded today by Morgan Stanley to overweight, citing an improved competitive position that will drive earnings growth. Stock up just about fractionally at this hour. In prepared testimony, the CEO of Wells Fargo plans to tell Congress that the bank is at risk for setbacks as it works to address longstanding regulatory issues. The hearing is scheduled for tomorrow, and the stock is down but 2.5%. The yield on the two-year and 10-year treasuries, notching new highs, the head of the Fed's rate-hike

decision, perhaps why stocks are moving lower at this hour, Ty. All right, Seema, the decision from the Fed will come in less than 24 hours from right now, widely expected that the Fed will raise interest rates by 75 basis points. That's three quarters of one point. And it upgraded its forecast for, and is calling, Nomura did, calling for a 100 basis point high. That's a full point. Rob Dent's the guy who made that call. He's senior economist at Nomura.

What persuades you, Rob, that the Fed is ready to, to do something they haven't done. Golly, I don't remember the last time that they raised by a point. And if they did, it had to have been under Volcker. Well, thanks, Tyler. Look, I would say a couple of things. Clearly, the strategy the Fed has been using for the past 12 months hasn't really produced the results. I think they've been looking for. You know, they've been gradually guiding the market towards higher rates over time. But trend inflation pressures really haven't improved much at all. In addition to that, financial conditions, we think, just continue to show they are not tightening enough for the Fed to feel comfortable that growth really is going to slow down and that the unemployment rate really is going to move higher, meaning that inflation could stay higher for longer. So, you know, from our perspective, I think this could be the moment where policymakers look up and decide we need to change strategy.

We need to surprise the market a little bit and just get a little bit more of a knee-jerk tightening in financial conditions to really get ahead of the entrenched inflation problem we think that they're facing. I don't disagree with anything you just said there about the entrenched nature of inflation or the need to squeeze it out because if we don't wrestle inflation to the ground, it becomes a very, very serious long-term economic inhibitor. But let me ask you this. I was speaking last night with a very skilled investor who said, it's one thing to do an interest rate hike, whether it's three-quarters of a point or a full point.

But then what the market is going to be listening for, is any, any, the slightest little hint during the press conference of a walkback? Because there's a lot of capital on the sidelines. There's a lot of dry powder that just wants to get in there. And that if the chairman kind of goes a little wobbly in that press conference, the money's going to flow in. We would be a little bit cautious of that view just because I think the Fed has become a little bit more concerned about how those press conferences have played out over the prior four meetings. Generally speaking, once the statement comes out at 2 p.m., we tend to see risk off price action in the market. And then once Powell

starts the press conference at 230, risk assets tend to rally. I think Howard's very aware of that right now. Yes. His objective tomorrow is going to be to come out and make sure that doesn't happen. I think he's looking at the market reaction to Jackson Hole where there wasn't a press conference, only the prepared remarks and saying maybe it's time for a little bit more of that. And I think the way you achieve that is by sounding, you know, as hawkish as you can. This is exactly what my friend said. He said when they didn't do the press conference, the hawkish message stuck in a way that it wouldn't have before. He's very skeptical, by the way, that if there is sort of a rally, that eventually it's going to get crushed

because eventually the Fed is going to have to do what you seem to be saying, and that is continued, very aggressively to raise interest rates through the end of this year. I think that's right. And, you know, I think that's another argument for 100 basis points. It takes away that uncertainty of how is the press conference going to play out. It buys you that immediate tightening and financial conditions that you can deliver with policy action, you know, directly at 2 p.m., removing a little bit more of the uncertainty of just how the press conference unfolds. And I think that's the signal policymakers want to send at this point. Most people we talk to suggest that 100 basis points might be the, quote,

right move from the Fed. It's just a question of whether or not they're willing to take that leave. And at some point, I think policymakers are going to look up and say, you know what, the inflation situation is bad enough. Growth needs to slow down and it's time to kind of change track. I've been bloviaguing. I want to get to see me in. Well, you mentioned the price action at the last Fed meeting, Tyler. The NASDAQ was up 2% the day that Powell hiked rates by 75 basis points. I guess, Rob, for the longer term investor who is less worried about the day-to-day price action, whether it's 75 or 100 basis points tomorrow. What's the message to that to that investor? who is more concerned about what their portfolio looks like in two years from now?

I think the overarching concern that we have is that financial conditions right now are not at levels that the Fed would consider overtly restrictive. I think they need overtly restrictive levels to slow growth and inflation. And so our view is that the Fed's going to remain very hawkish over the next six months, even as inflation slows. And the risk is that financial conditions over that period tightened very abruptly. We continue to think that we're going into a recession later, this year. We think that at this point, it's likely to be a Fed-induced recession to loosen the

labor market, to bring wage growth lower. And the real question right now is whether markets are fully pricing that in. We don't think they are, which means it could be a little bit rocky for the next six to 12 months. Okay. Right now, the Dow is down about 500 points. Rob, we appreciate your time. We'll be waiting for the decision tomorrow, Rob Dent, of Numura. Thank you very much. If you're looking for stocks that can outpace inflation, our next guest says health care is the place to be. Let's bring in Marianne Montaigne, portfolio manager for gradient investments. Maryne, great to have you on Power Lunch. Why do you think healthcare can do well in an environment where rates rise and inflation continues to be a big issue for investors?

Well, Sim, I think first of all, we're pointing to companies that are U.S.-based as a preferred area and within that the defense of the health care sector. We have companies who really rely on procedures and treatments rather than energy prices and inflation. They offer very strong dividend yields. Top three picks are Bristol-Myers Squibb, which offers a 3.1 percent dividend yield, and it's still cheap at only about eight and a half times forward earnings. They have a strong pipeline of new products, including a psoriasis drug, which can replace other drugs with no side effects. A second One would be Johnson & Johnson. It trades like a consumer staples company, but with a much lower valuation at about 16-time forward earnings, and it offers about a 2.7 percent yield. And then thirdly,

Medtronic, so this is medical devices that are for the treatment of heart issues. That's not something that is cyclical. It's just a condition that needs to be treated pretty quickly. So So that one's trading also at about 16 time earnings, but it actually has a growth rate that's stronger than that of Johnson and Johnson. And they've had supply chain headwinds. They've talked about that. Those headwinds, we think, are going to turn and tailwinds. Both Bristol and Myers and J&J have used MNA as a way to build out their pipeline.

Do you expect that trend to continue, even as rates rise? Absolutely. I think they're active buyers in MedTech. and pharma to enhance their growth prospects. Marianne, you seem to be making the radical position, that people are going to continue to get sick, even if there's a recession or inflation, right? I mean, that's the basic thrust here.

Yeah, you know, not just get sick, but I also have the opportunity to live longer. The numbers of people that are over 100 years old today are astounding. My dad turned 102 this summer. God, wow. Wow, awesome, man. Well, yeah, we're accustomed to that, but as many more people are. But he had a table full of friends who were all over 90,

and they all live at home on their own because of, you know, great strides in medical care. Wow. What's his secret, Marianne? 102. You know, he had some great kids who keep them going. I don't know. I love that. All right, let me ask you about Johnson and Johnson.

I thought Johnson and Johnson was doing something where they were going to break the company in various parts. one was the consumer products, the other was the drug pipeline. I want to ask you about that, their strategy, and are you at all troubled by what J&J has done with respect to setting up a shell company to handle the liabilities involved with their talcum powder lawsuits? It's called a Texas two-step. It's a very controversial move. Frankly, it seems to be. like it's raising a lot of questions. You worried about that at all? You know, that's not a concern for me. It's a legal maneuver to separate the trials and tribulations at trials, really,

from the rest of the operating company. And it's probably a good decision to keep it separate. Our last guest said he's expecting a hundred basis point rate hike tomorrow. If we see a more aggressive stance from the Fed, how do you expect healthcare stocks to react? I would think that they would do well in a higher inflationary environment. The problem with the whole 75 or 100 basis point increase tomorrow is simply that I don't think it frees up supply chain. And that's been the problem at FedEx and at Ford. We have to have supplies out there in order to manufacture. And I think that ripples across the entire industrial sector.

And that just makes health care look more attractive. Yeah, supply chain does not seem to be getting better anytime soon as we heard from FedEx and General Electric last week. Marion, we appreciate your time. Thank you, Sam. Mary Montana, upgrading investments. All righty, coming up, 3M making a big investment in hydrogen, but will its green strategy help the stock, which is down about 35% this year, plus smoother sailing for Norwegian cruise line? Shares are up about 15% this month. We'll talk to the analysts who upgraded this stock this morning.

figures the stock can go even higher. How about Nike downgraded, heading into earnings next week. It's down 3% today, 38% of so far this year. Seamus from Oregon, she knows a little bit about Nike. I sure do. Is it a buy on the pullback? We'll trade it in today's three-stop point. Ten minutes away from where my high school is located.

Is that really? Yeah, huge campus. They wear Nike stuff? They did. They wear Nike. Welcome back to Power Lunch. 3M announcing today that it's developing a new technology to manufacture green hydrogen at a lower cost to customers.

Demand for green hydrogen has been growing as the automotive industry looks to pivot to clean fuels. 3M's bet comes as the stock has lagged recently. Shares are down 20% over the last month with the overall industrial sector outperforming 3M by 10%. Industrials overall have faced a tough year, but my next guest says demand will remain strong in the sector despite ongoing market volatility. That's Dean Dre, RBC Capital, Markets Managing Director, Dean, thank you for joining us. First, want to get your reaction to 3M's pivot into hydrogen, clean energy. Is it too late? There's certainly a number of other companies

who are trying to do the same thing. Yeah, thanks for having me, Seema. No surprise that 3M's making this announcement. There's a big event this week in New York Climate Week, and 3M has got a headline out there talking about some of their initiatives in green hydrogen. but these are really early stage R&D, venture capital, arm part of 3M. It's not what we would consider to be needle moving at all for the company, but it's certainly a sign of the times. We see a number of companies we cover that have similar green initiatives going on right now. Let's pivot to GE, warning from the CFO last week saying that the supply chain issues are continuing

and that they see their free cash flow under pressure. that sort of weighed on the broader industrial sector. I'm curious if GE is the first shoe to drop or you think other industrials could come out with a similar warning in recent week, in future weeks. Yeah. So first of all, every industrial company is talking about supply chain pressures. This has been with us for more than a year. Maybe at the margin, it's getting a little bit better, but you are seeing it pressure all of these companies. And it is showing up in working capital, drags and as a result, lower free cash flow. So this feels far less specific to GE and much more of the sector and the operating macro that everyone's working in right now. But you do bring up an

important point. We're at the threshold of third quarter earnings and this will be the next opportunity here from companies as to how they're holding up in the macro. And so far, based upon our conference last week, the demand still remains resilient. You know, Dean, you caution going back to 3M that the results or this report is a very early stage indicator and that it's not a needle mover in terms of 3M stock. But I do wonder this. There are a lot of companies out there, a lot of large industrials of 3Ms of the world and many others that have very active industrial R&D,

arms. How do you rank 3M in that whole cluster? Are they ahead of competitors? Are they right there with a group of competitors? How do you rank them against other companies that may be sniffing around the same innovations? Tyler, that's a really important point is it's hard for us to be able to identify who's being really successful in R&D. You can look at it as a percent of revenue. So 3M, it's anywhere between 5.5 and 6% of R&D to revenues. It's among the top decile. We also look at new product vitality. How is the percent of new products introduced in the last three years of percent of revenues?

And 3M has been essentially a machine in being able to crank out new products. So they typically get really high grades in terms of their R&DM. R&D initiatives. But, you know, I just want to highlight also Honeywell. Honeywell right now, half of every R&D dollar being spent is geared towards sustainability initiatives, sustainability technologies in some way. So it's really, you know, it's opportunistic, but, you know, that's where the expected growth is. That was an interesting answer, Dean. Thank you. XLI down 1.8% right now. So it's down a bit more than the broader market. Dean, thanks for your time. Appreciate it.

Thank you. All righty further ahead on the program. Getting thrown a lifesaver, President Biden declaring the pandemic over poof, just in time to potentially aid cruise stocks, which have struggled significantly this year and for the past two or three or four or whatever. Today, too. Yeah, they're struggling. Sinking today.

We'll look at why Wall Street says now is the time to jump aboard the sector. Plus back in the New York groove, the number of workers in New York City hitting its highest levels since the pandemic. what this means for the city's commercial real estate. And don't forget, CNBC's delivering alpha returns in person on September 28th. The world's top investors will discuss risk opportunity, navigating these new market dynamics. You can scan the QR code on the screen. Let's leave it up there for a second.

I'm just going to keep talking for about five more minutes. Go to CNBCEvents.com to register folks, QR code or dot com events. Big lineup. We'll see you there. It is a down day in the markets and really no place more so than Ford. It is down 11% today. Worst performer in the S&P 500. That's 500 stocks there, folks, on pace for its biggest one-day drop in more than two years.

The company is saying inflation and parts shortages will leave it with more unfinished vehicles than expected. And the parts it is able to get are going to cost more, a lot more. It's going to have to pay suppliers. It says about a billion dollars. more than it had budgeted for in the quarter. That is not small change. Let's get to Christina parts in Evelace now for CNBC news update. Christina. Hello, Tyler. 47 people have been charged with allegedly stealing $250 million in COVID aid. Federal prosecutors say the group claimed to be serving meals to thousands of low-income kids, but instead they use the money to buy luxury cars,

property, and jewelry. Isn't it? The scheme that began with a simple idea in March of 2020 grew to become the largest pandemic fraud in the United States. As alleged in these indictments over a short period of time, these 47 defendants engaged in a brazen scheme of staggering proportions. The White House is accusing Russia of holding sham referendums in parts of Ukraine in a bid to absorb those regions into Russia. National Security Advisor Jake Sullivan says the U.S. will always recognize those areas as belonging to Ukraine. And in Las Vegas, the local official charged with murdering a journalist who wrote articles or one article critical of him has been arraigned. Robert Tells was assigned court-appointed attorneys. He was not asked to enter a plea. Back over to you, Christina, thank you.

Coming up on Power Lounge, some Musk C-TV tomorrow, Jay Leno, getting a special visitor to his garage. That is the CEO of Tesla, Elon Musk. Sitting down with the fame late night show host, Jay, will join us right here on Power Lunch and tell us what they discussed. And let's take a look at the markets off the lows, but still deep, deep in the red right now. Dow is down 1.4%. S&P 500 down about 55 points. The biggest laggard right now is Ford. That is weighing on the index. We'll be right back. All right, we got 90 days left. 90 days. It feels like 90 days. 90 minutes left in the trading day. We want to get you caught up on the markets, stocks, bonds, commodities. And then Jay Leno's going to join us.

He talked with Elon Musk for the latest episode, new season, Jay Leno's garage. But let's begin with stocks. It's not a pretty picture. Though the Dow industrials are off the lows of the day, I think the lows were about a negative 530. So you've got the Dow now at 30,573, basically one day away from going below 30,000. There's your S&P, off 55, about 1.5%. Let's call them all sort of in the 1.5% one and a quarter, 1.5% neighborhood in terms of negative. of action. Ford, as Seema mentioned, one of the big drags there in the S&P 500 as the company

continues to struggle with supply chain issues. Let's turn now to Rick Santelli on this day before the Fed meets. Rick, a clear indication from the bond market on what they expect or it expects from the Fed. Tell us about it. Yes, no. As a matter of fact, I was somewhat shocked today, Tyler. Look at an intraday of 20-year bond yields. Right around one o'clock Eastern when the auction for 12 billion of those buttoned up, you could see what happened to rates. They fell. Yes, there was a lot of buyers that showed up, and it surprised me a bit, considering tomorrow looks to be the third, three-quarters of a rate increase in a row. And if you look at 20-year bond yields, they're going to be closing at a fresh 11-half-year high. As a matter

In fact, all long maturities, which weren't keeping up with short maturities like two and three year, which have most closely followed the Fed's tightening cycle, but that's all changed. If you look at 30-year bonds, they're on pace for the highest yield close since 2014, call it eight and a half years. And if you look at the 10-year today, yesterday we closed above that very significant 3.48%. That was a high watermarked for June. And indeed, it's now on pace for another fresh 11-half-year yield high close. And it's not only with the long-dated and short-dated treasuries, Tyler, look at the ETFs that represent a fixed income glimpse as well. HyG, a high-yield ETF?

It's on pace for the lowest close since July 1st of this year. Call it a couple of months. But as you look at that, realize we're on the precipice of much more aggressive sell-offs. Look at the mob, this is a muni ETF. We were talking about munies and how the price drops playing havoc with many investors at the moment. Well, they're on pace for the lowest closed since March of 2020. COVID. But look at that chart.

They're just a whisker away from the lowest closes since 2014. If you look a bit past what we're doing in March of 2020. Let me, let me pause one question. Can I get one question into Rick? When we looked at those last two ETFs, we're looking at the. price of those ETFs, correct? That's correct, the price where I normally, especially with the H.Y.G, I normally look at the securities and look at the spread between, for example, a high yield instrument and a comparable

maturity in sovereign, like a treasury, which is your best credit. So as those prices drop, that's not a good thing. In the case of the HYG, the spreads will be getting wider in the securities industry and in the munis, the price is dropping pushing yields up. Because yields are going up or they push the yields up. Rick Santelli, thank you very much. We got oil closing for the day. Pippa Stephen. No, there is no Pippa Stevens today.

Sliding throughout the session prices, oil prices. I'm so excited to be back up and standing fully in front of everybody. Fed concerns, that's the big thing. The U.S. economy may be a recession, global recession. Who knows? Slowing oil demand. September is on pace to be the fourth straight losing month for oil. Can you believe that?

and the quarter ending in 10 days could be the worst quarter for crude since the beginning of the pandemic. Well, you know what needs fuel, lots of it, rockets. New episode, Jay Leno's garage airing tomorrow night at 10 p.m. Eastern Time. The Rocket Man himself, Elon Musk, took Jay Leno on an exclusive tour of SpaceX's star base facility. Leno calls Musk one of the greatest innovators of all time. Hard to debate that. And talk to him about the future of space. humanity. We're trying to achieve the holy grail of rocketry, which is a fully and rapidly

reusable rocket. No one has ever made a fully reusable orbital rocket, and never one that could be rapidly reflown like an aircraft. And that is actually the essential sort of invention, if you will, that is necessary to make humanity a multi-planet species. Joining us now is our friend Jay Leno, host of Jay Leno's garage. Jay, welcome. Good to have you with us. Thanks for having me. Well, it's fantastic to have you with us. What was your impression of Elon Musk as you toured his facility down there. Well, you know, I live in Hollywood, which has a lot of dreamers. People dream of making a movie, but oh, here's what happened.

We almost got there. We almost got. He's a dreamer where the dream actually comes true. You know, I first met Elon back in 2007, and he came by with his Tesla Roadster. That was the original two-seater, small electric sports car. And I thought it was nice and interesting, you know. And I remember he said to me, you know what I'm going to do. I'm going to build these charging stations all up and down the coast and hopefully all across America.

So people would just pull in and charge for free. I'm going, yeah, okay. Yeah, that's going to happen. You know, I mean, I thought it was interesting. But like most people I meet, it never comes to fruition. And yet, that's what he did. He was building the infrastructure as he was building the product. Even today, when I see other electric car manufacturers, they can build an electric car okay.

but they don't seem to have any interest in the infrastructure or how to keep it going. I mean, now they do, and they're hooking up with other companies, because I think Elon got the bandwagon started. But that's a classic example. You know, he knows manufacturing. Yeah. Go ahead. You are obviously a car guy par excellence.

Do you remember riding in that roadster and how fast it is? Yes, it was quite quick. It was fast. It had the problem. It was quick. I remember I had one of the early EVs from General Motors, but it only had a range of like 80 miles, which is really only a range of 40 miles,

which is really only a range of about 30 miles, because you drive and then you go, am I going to be able to go home again, you know? So it really took Elon to take it to where it is now. I mean, I remember back in the day, people saying it would take 50 to 75 years for the electric car to overtake the gas car. Well, that's happening way quicker than that.

because battery technology has increased tenfold. You know, for new technology to exceed, it can't be equal, it's got to be superior. And for years, it might have been quick and it might have been maintenance-free, but it didn't have the range, or you couldn't charge on the road. Well, now a lot of those problems are being dealt with, you know. And that's what I admire about Elon. You know, when we were down there, he was explaining the manufacturing process. I remember he said it cost a billion dollars to put one gallon of

water on Mars. He wants to get it down to $100,000 a gallon, which is still crazy money, but it's not a billion dollars. You know, and he's a practical thinker. He understands manufacturing. He understands supply chain. I mean, he built that whole place down there in two and a half years. I'm watching NASA try to get two rockets. Yeah, go ahead. Yeah, and Jay, that's why Tesla is the leader in this electric vehicle space, but it's becoming a crowded market. I'm just curious what Elon shared with you about the competitive landscape, folks like Rivian and Lucid Motors that are now playing a bigger role here. I think it's great. I think it's great that they're American companies. You know, we're getting like the English here in America. We like noble

failures. We seem to revel in people's failure so much as opposed to applauding their success. I mean, the thing I, I remember people said to me, oh, Tesla's doing okay now, but once the Germans and everybody else get involved in the electric car market. They're going to blow them over. Well, they still have it. He still has just about the longest range battery, or right up there. When he was getting 300 and 400 miles range, everybody else is at 250 to 275. And he's still pretty much ahead of the game. So I would not, I would not rule it out. And the fact that I will always go with an American-based manufacturer over a European one. I've driven the Rivian. It's a fantastic. truck. It's really good. And, of course, the Lucid, excellent also. Lucid is quite a bit more expensive than the Tesla, but that's okay. And, you know, the thing I found fascinating about Elon, he doesn't believe in patents. You're competitive.

If you've got a good product, let everybody use it. Because his thing is to get the electric car ethos out there, get everybody understanding how it works. And the more manufacturers there are, the more people getting in on the game, the better it is for him. he's already the, if not the richest guy in the world, okay, the second richest guy in the world. So he doesn't think like a billionaire.

There's no giant yacht, there's no mansions all over the world. When I went down to visit him, he had his little irstream trailer in the parking lot. That's amazing. And that's where he lived. I mean, that's where he lived. And, you know, we just eat the regular sandwich. But the most fascinating part was, as we walked around,

He's got this project to put, he wants to build a thousand rockets to go to Mars. And you go, okay, that sounds like some bad 1953 science fiction movie. But then you go into SpaceX and you see hundreds and hundreds of huge, most, the most powerful rocket engines in the world lined up there and you realize, okay, this is going to happen like all the other things he said would happen. You know, so he's a dreamer who actually fulfills a dream. Well, I think that's really a great caption on his life. I mean, he's a guy, like you say, in Hollywood, there are big dreams, but a lot of them don't happen. He's a guy. He's a doer and not just a dreamer. You know, this season in your program, you not only got to chat with Musk, you sat down with President Biden.

I know where you took a ride with him in an electric car, you talked about electric vehicles. Let's take a listen to one of those passages. As electric cars, a big part of your climate bill? A gigantic part. Also part of the, what people don't realize, is part of the infrastructure bill, you know, building the highways and the like. Because we're talking about putting 500,000 charging stations and the money for those charging stations in that bill. In addition to the charging stations, individual companies are putting in.

So it's, you know, it's a game change. You got 40% of all pollution, all the CO2 going up is from a tailpipe. Right. And imagine we just change that. You know, President Biden is also known as a car guy. I am sure that while you seem to be a devotee of electric vehicles, he certainly is both politically. You've got to miss the roar of the engine, right?

I mean, I'm sure he must, and you must. Oh, yeah, of course. And, you know, there's no reason you can. Personally, in the same way the automobile was the savior of American horse, I think the electric car will be the savior of these classic vehicles that we all like to restore. But it will become like a recreational vehicle. I mean, to have a 426 hemie, which gets 9 to 11 miles per gallon, idling on the 405 freeway and bumper bumper traffic makes no sense.

So use your electric car on the weekend during the week. And then the weekend comes. You want to go to Bob's Big Boy. There's a car meets in Valencia, whatever it might be. Then you do that. And I think it'll take the pressure off the internal combustion engine because there won't be as many of them. So consequently, it will ease up a bit perhaps and gas will become more plentiful. I see it all as a good side.

You know, when they asked Henry Ford, when Henry Ford was asked, what do people want? He always said, fast a horses. You know, nobody could think of the automobile as a practical thing that every American could have. And what are you going to replace blacksmith shops with gas stations? Is that what you're going to do? Yes. And that's what we did. And eventually you will see gas stations being replaced by charging stations.

But there are still horses. There are more horses today than the were during the Civil War. And I think all of these sort of cars will be somewhat classics and people enjoy working on them and tinkering with them. But you use your electric vehicle to go to the airport or run errands. I have a little electric car that I used to run around town. You know, I, I, I, to me, it, it just seems to make sense and it seems like the future. Jay, thank you so much for your time today.

We appreciate it. Thanks for taking the time. Oh, you bet. Tomorrow night. All right, yeah, tomorrow day, catch a full episode of Jay Leno's garage with Elon Musk. That's tomorrow night at 10 p.m. Eastern time only right here on CNBC. Thanks, thanks again, Jay. All right, a look at the markets, NASDAQ down 1.4%.

Names like Meta, Amazon, Alphabet. that all trading lower. After the break, crew stocks are also lower for the year, despite the pandemic slowdown, but one analyst out with a new note getting bullish, our Norwegian cruise line. We ask him if this is a pivotal moment for this industry. We'll be right back. Welcome back to Power Lunge. Cruise line booking volumes

are estimated to have surged by 30% in the last three weeks of August versus 2019. That led our next guest to upgrade shares of Norwegian to a buy and saying its luxury offering. sets it apart, set it apart from its competitors with the analyst behind the call is tourist Patrick Scholes. Patrick, good to have you on. You've been pretty negative on cruise lines. Why the upgrade and the sudden change in your outlook? Well, what's really interesting, Seema, you know, I would say like Lazarus rising from the dead, as soon as the cruise lines in early August paired back on the vaccination and the testing requirements, we saw really,

an explosion of bookings for the next four weeks. Now, to be clear, they've moderated since then after Labor Day up mid to mid single digits, but certainly much stronger pace of bookings than we saw in June and July where they were still tracking down 10 to 15 percent versus comparable pre-COVID levels. Despite your upgrade, all these stocks are trading down with the broader market. I think Wall Street is still concerned about the. debt on the cruise lines balance sheet. Your thoughts there.

Can they get around it? Yeah, you know, I think if assuming these strong revenue trends continue, you know, that will bode very well for them. And certainly it's quite an excruciating exercise in modeling all these various interest expense and pro forma situations. But we do model that, you know, assuming that we don't have some other horrible black swan events that these companies will be able to survive. Granted, the cost of debt is very high for them, but the best thing that I can say is that

revenues are finally starting to come back and we keep our fingers crossed that it will continue. FedEx told us that a global recession is coming, yet travel companies, a lot of consumer-facing names, have been painting a rather optimistic picture around Americans and how much they're spending right now. Why do you think we're seeing this divergence in the economy and what these CEOs are telling us about the future coming months? Well, there's a couple things here. First of all, I did upgrade Norwegian. In addition to the strong trends, Norwegian has far and away the greatest exposure to luxury and super high-end luxury. It's about a third of their business. And so that component of consumer spending and travel is blowing away the mass market spending.

Keep in mind, I still have a sell rating on Carnival, which does have far and away the greatest mass market exposure. So I'm picking my names carefully, dipping my toe back in. And I just felt most comfortable with the forward booking and pricing data, especially on the higher end. certainly what's driving that. People have still been cooped up for a couple years and they want to get out. That combined with, as I mentioned, the dropping of most vaccination and testing requirements. Okay. We'll see if luxury can be an area or a pocket of growth amid rising rates. Patrick, thanks for joining us. Patrick Schultz. All righty, coming up, but today's three-stock lunch will run through the key movers of the day.

And as we head to the break, we celebrate Hispanic Heritage Month. Here is Arizona Coyote's president and CEO Xavier Gutierrez. One thing I definitely have always talked about is the opportunity to do for others. And that's what I try to share with so many, especially young Latinos and Latinas, is that in their life and in their career, they can really make an impact and really make a change. And not only that, but they have that responsibility to do that, to use their voice, use their platform. It can happen in so many different ways. You'll end up, you know, potentially running a national hockey league team. And yet, what am I able to do is really open

doors for others, bring diverse voices to the seat of decision-making and really making an impact. All right, folks, welcome back. Time now for three-stock lunch. We're going to trade some big movers of the day, shares of wind resorts rising on news that COVID restrictions could begin to ease in and around China, warehouser, lower on a downgrade to neutral at Bank of America. And Nike lower after a downgraded Barclays citing concerns of excess inventory in its wholesale business with us. Steve Grasso, CEO of Grasso Global and a CNBC contributor. Let's start, why don't we with, shall we start with Wynn? Let's do that. Is it a winner or not? Yeah, so, yeah, so, so, so, win is, is probably my favorite stock out of the three. You, you nailed it. It's lowering the COVID

quarantine, uh, protocols. I think. that was the major tailwind for the stock today. Then, Ty, if you look at the, if you look at the technicals on it, it's had recent momentum, the stock is off its lows, it's up 22% in the last three months, the 50 days moving up through the 100 day. That's always a positive. Heading towards the 200 day. And if you look back on the chart, Tyler, this stock has not been above its 200 day since July of 2021. The chart looks excellent. I'd be bullish on when. I think most of the bad news is out of the way. Stock is higher today. Steve, next up is Warehouser. What do you make of this one? So this is the most negative out of the three that I'll be, Seema. And if you look at it,

this stock is tied to lumber prices. And if lumber prices are headed lower, or at least not going back up to that nosebleed territory that we saw them at, this stock should be heading lower as well. It's tied to the housing market. The housing market has just started to show signs of weakness. So further weakness means further weakness for this stock. All right. Let's move on to our next and final name, and that would be Nike. Right. So, Tyler, this one I put in that neutral to buy camp for me. So what I do like about it is that it was recently downgraded. When you get a stock that's recently downgraded, that allows the Bulls to have a better entry price going forward. This stock has gotten hit. We all know the bad issues of the stock.

We have a strong dollar. We have the zeroed COVID policy. 60% of their revenues are based off of North, outside of North America. But if you look at the chart, this one had a low recently. It defended that low. That low was $100. So if you want to be a buyer and you can't help yourself here, I would use that $100 as a stop loss, meaning you buy it here. You shoot against 100. If it breaks 100 to the downside, you should probably exit the trade. But this one looks like the setup might be okay going forward. My friend, thank you very much. We finished three drinks there in about three minutes. Have a good afternoon.

It's usually what I do. It's usually what I do in the bar. Good stuff. Thank you, Steve. Good to see you. All right. Still to come, New York offices are filling back up, but are things returning to normal? We've got that story next. Welcome back to Power Lunch and welcome back to Manhattan for many office workers. Last week's number were the highest since the pandemic began, but it's a little too early to call it a return to normal. Robert Frank joins us with that story. Hi, Robert. Seema, well, if you look at Wednesdays at least, New York City is getting back to the office. The average office occupancy for last week was 47%.

That's a huge jump from the 38% the week before, by far the highest since the pandemic. Wednesday actually hit 57.5% with big drop-offs on Monday and Friday. New York subways, buses, and commuter rails hit a post-COVID record as well on Wednesday. The subway carried three points. 7 million people. That's about 63% of pre-pandemic levels. The same goes for buses. The number of workers who are still fully remote also down, only about 16%. That's down from 28% this spring. And three days a week seems to be the new normal. A survey of employers by the partnership for New York City found that 77% employers are going to stay hybrid. Now most are going to be

three days a week by the end of this year. Only 11% will be in the office five days a week. It also varies by industry. Real estate companies are expecting 82% of attendance. They're the biggest by the end of the year. Financial services also up there at 61%. The tech industry, not as high. That's about less than 50%. If you look nationwide, the city with the highest office rate right now is Austin, Texas at 61%. The worst is San Jose. It's still on. 40%. Robert, thank you very much. Robert Frank reporting and thank you for watching Power Lunch today.