Power Lunch - The labor market sizzles, gas prices hit a record & the Bristol Myers Squibb CEO 06/03/22

Episode Date: June 3, 2022

Good news on the job market is bad news for investors. Stocks are lower as the market attempts to balance strong economic data and the fed’s tightening campaign. Kelly & Tyler asked our market guest for his best strategy. Plus, the CEOs from two stocks beating the broader market. The CEO of Bristol Myers Squibb discusses his company’s $4b acquisition of a cancer-focused biotech and the CEO of Cigna discusses the insurance industry’s changing landscape. And, we’re trading the stocks leading the bear market bounce. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. I'm Tyler Matheson. Here's what we got for you this afternoon. The labor market continues to sizzle. But good news on the jobs front, sometimes not such good news for investors. So should you stay defensive? Our market guest says, yes, you should. And a health care power player, the CEO of Bristol Myers Squibb, talks about his company's acquisition of a cancer-focused biotech. The stock is up 20 percent year-to-date. Will today's deal keep the momentum going? We'll ask him in just a few minutes. Kelly? Tyler, thank you. Hi, everybody. The major averages are all down for a third time in four days, and they're lower for the week. Now, remember, last week was the first time in nine that the Dow was actually positive. Now we're back in the red as the Dow's down 315 points, a little off session lows when we are down 396. The S&P is down 66, so that's a 1.6% drop. The NASDAQ is the worst performer, down 2.5%. And we do have yields moving higher. The 10-year moving back towards that 3% level following the jobs report this morning. We're just a hair. under 296 right now. It's been steadily creeping higher over the past week. And as it rises, tech shares are retreating again. Micron dropping 7%. It had a downgrade today. Invita might be down kind of a halo effect from the same worries over consumer end markets. Apple down 4%. Also having

a cautious research note from Morgan Stanley that pointed to a slowdown in App Store growth there. So, Tyler, the big question remains. Are we seeing macro trends, rates, or simply a change from strong pandemic buying of electronics into something different post-pandemic. Well, we'll pick up that very thought with our next guest, who is avoiding technology shares as the sector undergoes that valuation reset. The sector's forward PE late last year was more than 28. Now it is a quarter lower at 21. Instead, he is sticking to defensive names in areas like telecom and dividend payers in staples,

pharma, utilities. Let's bring in Stephen off. Equity, CIO at Federated Ermi's. Stephen, welcome. Good to see you. Thank you, Tyler. Explain first, why don't we start with your hypothesis on what the economy is likely to do, where inflation is likely to be, where unemployment may be, and how that feeds into your more defensive stance.

Yeah, I mean, fair question, Tyler. The issue we have right now is that's probably one of the more difficult questions to answer, as all your guests have been saying, the outlook is really cloudy going forward. Our base case is for a rocky landing, which I define as, you know, maybe inflation getting down to three to four percent range.

I'm more in Kelly's camp there, that it's just a hard beast to completely tame. That means you're probably looking at a 10-year rate in the three to three and a half percent range on a long-term basis. And, you know, probably the economy, We just cut our economic growth numbers for this year to one and a half and to two and a half, two and a half this year, one and a half next year, real.

So a kind of difficult economic backdrop. You add that all up, I think you want to stay pretty defensive here. You've got probably double counting of earnings from the COVID lockdown still coming off on the tech side. So I think they're facing probably a couple of weak quarters on earnings against a backdrop of rising discount rates and valuations and still probably too high multiples. So I think, you know, it's, you know, everyone wants to get back in there. I get it. Some of these are really great companies for the long haul, but the near-term outlook, I think, doesn't look so good. At what point, you say people want to get back in there, at what point on the S&P,

do you think that much or most of the recessionary fear or the pricing reset fear will have been washed out or played out. Is it 3,800, 3,700, where? Yeah, we're at 3750. Tyler, the way we get there, you know, I think one of the frameworks here that we think is very different than what people have experienced of late, and so they're really not thinking about it this way. But even if you get, you know, say an economic recession or rocky landing like we're calling for, you might get not much worse than an earnings slowdown, whereas normally, you know, people talk about economic slowdowns and earnings recessions. And that's because companies, stocks work off of nominal sales and nominal earnings. And with inflation still pretty high, nominal sales, even in a rocky

landing, could stay reasonably, you know, mid to high single digits. Marching compression might bring you down to flat earnings. So the market, we think, is getting close to a bottom. Our idea is like maybe 220 on earnings on the S&P this year. That would, and probably a 17 multiple, assuming a 3.5% inflation rate. So we think that's kind of fair value in the near term on the S&P. We're getting closer, maybe another leg down here somewhere, you know, below $3,800. So let's get to some specific. Cyclicals, okay, you want to transition it, but that's exactly where I would go.

I mean, if you look at the cyclicals, okay, you want to transition it, but that's exactly where I would go. I mean, if you look at the cyclical. names, those are closest to discounting that scenario. The problem with the growth names is they haven't fully discounted the earning scenario, and they still got pressure on the interest rate scenario. So it's tougher to call it where they bought them. So cyclicals you look at, I guess you call it an industrial, United Rentals would be in that category. You like Verizon, good dividend payer, boring, among the most boring of stocks over the past decades.

but not so much now. It's got a lot of backers. Talk us through your picks. Okay, so first on the boring side, you have you got this framework right. Sometimes losing less money is good enough or making 5% on a dividend, which you can on Verizon,

might be a really attractive return. So we like boring here. We'd be fully loaded in telecom names, things like Verizon, where they're coming out of the CAPEX cycle. You know, so they've got probably pretty good cash flow ahead in our view. and even a little bit of pricing power, they're putting through a price increase, as you know, right now.

So, you know, we think that company, 5% dividend yield 10 times multiple looks pretty good. You know, a lot of the other stables, like Exxon, a little bit more difficult because it's had a good run. We've been there all year. I remember Kelly and I talking about that stock a year ago. So we've been in it in a while. But, you know, the 3.3% yield, it's still got a good story. And what keeps getting in my head is I've got what. at 120 probably for the next year or so.

And on that level, Exxon's going to be throwing off an extra 15 billion of cash flow that it's not going to know what to do with. And we're pretty sure we know what they're going to do. They're going to buy back stock. So stock buybacks will help that stock. I think that's the next leg up. I expect Exxon to break the new long-term highs. It still hasn't done that.

It's just about now getting to where it peaked out back. in 1516. And, you know, on the cyclical side, Tyler, there I think you want to just start lagging in. I think it's very hard to call a bottom. We've had, you know, a URI you mentioned as a name we like. It's down 23%. Well, if it's size, fifth third bank, you know, good, you know, Midwest slash Southeast Bank that's got, we think, pretty healthy balance sheet and good cash flows associated with it. Those kinds of stocks are down 20% already. I think, you know, you leg into him here, wait for maybe a better bottom, but we're getting close. Steve, it's been a while.

Good to see you again, sir. Stephen off. Thank you, Tyler. We appreciate it. Now to a big deal in the biopharmas world today. Bristol-Myers Squib buying Turning Point therapeutics for $4.1 billion. You can see Turning Point shares more than doubling today. Bristol, slightly lower, but up more than 20 percent so far this year,

pretty great performance compared with a 14 percent drop for the S&P 500. joining us now as the CEO of Bristol Myers alongside our very own Meg Terrell. Welcome to you both. Meg, kick things off. Kelly, thanks so much. Dr. Giovanni Koforio, thanks for being with us, really kicking off our ASCO Cancer Research Conference coverage for us here on this Friday. Let's start with your major acquisition news today. What will Turning Point bring to Bristol? Well, we're very excited about the acquisition of Turning Point, Meg.

Thanks for having me. We know the people, the science, of turning point, we have great respect, we see tremendous potential in value in repotrectinib. It's a novel asset that is being developed for the treatment of patients with a form of lung cancer, which is an area that we know well, and we're looking forward to launch as early as next year. You know, when we looked at the data, it has the potential to be a best in-class agent, particularly given the duration of response and duration of therapy, it can expand the class, and it fits particularly well with our strategy in oncology.

It adds a precision oncology pillar to our strategy where we've been focused on cell therapy and immune oncology. So very aligned with our strategy and it strengthens our prospects for growth. Well, let's talk about the rest of your oncology franchise as well. And the big upcoming weekend with the world's largest campaign. a research conference happening in Chicago. What else can we expect from Bristol in terms of data and updates out of the meeting? Well, great progress with our oncology pipeline and portfolio.

For Obdivo, we are presenting data in an early stage of lung cancer called the new adjuvant space. That's an opportunity to really change the way early stage lung cancer is treated. Very, very exciting data. As you know, we have a growing franchise in cellular therapy, and we're presenting data. on Brianzi, our cell therapy for lymphoma in earlier stages of the disease. And that's really important because it can make cellular therapy available to more patients. You know, that's an area where we've been developing a really important leadership position. And then later this

month at a hematology congress, we're also presenting really exciting data on our cell mode program, particularly in myeloma and lymphoma. So when you put it all together with the acquisition of turning point and repotrectinib, we're making great progress, actually, to strengthen and diversify our leadership in oncology. And, of course, that's a big part of our story in terms of the growth of Bristol-Maisquip going forward. Well, I want to ask you also about the cell therapy landscape right now, these personalized cancer treatments where you're actually taking a patient's cells out of of their bodies, sort of beefing them up to better fight cancer and giving them back. I mean,

these have been really amazing advancements in cancer treatment and many cancer types, but we understand there's been some manufacturing hiccups across the space where supply just can't keep up with demand here. What's Bristol seeing along that front? And do you see this getting alleviated anytime soon? Well, let me say, first of all, that we're rapidly becoming the leader in this space. And we received approval earlier this year for two cell therapy treatments, a BECMA for multiple myeloma and brianzzi in lymphoma. You know, there is a tremendous value in these treatments because of the transformational efficacy. So there is a lot of demand. Physicians are eager to prescribe cell therapy treatments. And we're working very diligently to

increase our capacity. So we do expect actually to see significant. increase capacity in the second half of the year. What's really important is that we are just at the beginning of seeing the potential of a new modality like cellular therapy. And this is the first generation of treatments, but looking forward into our pipeline, we see an opportunity to continue to transform the way cell therapies are administered. And so, for example, earlier this week, we announced an agreement with a company called Nematics, where we're going to be working together to potentially in the future develop what's called off-the-shelf cell therapies. So it's just the beginning, and I'm really excited that the potential to transform the treatment

of cancer is extraordinary there. Dr. Koforio, it's Kelly here in studio. We've heard from a lot of major CEOs over the past couple of weeks with some pretty concerned words about the economy and where we're going. You seem to have a lot of promising things going on. Your stock price is up 20% year-to-date. Can you categorize what you think is happening with the U.S. economy right now and if you have any major concerns about it or any sign that you might be slowing, hiring, starting layoffs, that kind of thing? Well, for us, this is a really important year at Bristol-Maisquib. You know, we're positioning the company for growth.

The objective for us this year is the approval of three first-in-class medicines. We've already received two approvals for Obdulag in cancer and Kamzios and cardiovascular. We're looking forward to the pedoufa date for the Kravacididem in psoriasis in September. So for us, it's actually all about growth and accelerating the new product portfolio and the renewal of our business. Of course, we are looking at inflation. It does not have a major impact on our company. Right now, we're very focused on continuing to attract talent into the company. At the same time, I must say we have an incredible pipeline.

We've more than doubled the size of the pipeline at BMS. We have exciting science. We're attracting great scientists. So for me, it's all about really growth and positioning the company for the future. And this is a really important and successful year for us. Well, Dr. Koforio, it's Meg Terrell. Again, just one last quick question for you. You spoke about growth.

You did a big deal today. Biotech is welcoming it. Are you going to buy more? Do you have more firepower that you could deploy an MNA? We have tremendous financial flexibility, Meg, and we have always thought about business development as a key integral part of our innovation strategy. And we like to do deals like Turning Point,

where we have assets where we can look at the data, we understand their value, and they fit into therapeutic areas that we know really well. In this case, of course, lung cancer. So we're always looking for the right opportunity and business development going forward. We'll continue to have a really important role for us to play. We have tremendous financial flexibility and great scientific depth and knowledge in multiple areas. All right.

Dr. Giovanni Koforio, thanks so much for being with us. We really appreciate it. Thank you. Thanks very much. All right. And Tyler. Go ahead, Mac. I guess we lost me.

We're on the weekend and on Monday morning with a great lineup. guest. You can see Gilead, CEO, Astrosanica, CEO, Merck's chief medical officer will all be with us on Monday from Chicago. That's fantastic. Thank you very much. Meg Terrell and Dr. Koforio, we appreciate it. Coming up, retail gas prices jumping overnight. Another record, gas futures hit levels never seen before. We will ask a former industry insider if there's any relief in sight, plus stocks that are leading the bare market bounce, but are still deeply oversold. Names like Tiro Price, Bath and Body Works and Best Buy. We'll trade them in today's three-stock lunch when Power Lunch continues.

Welcome back to Power Lunch. Gasoline prices hitting another record high, jumping five cents overnight. The national average for a gallon of gas is now $4.76, according to AAA. The average one month ago was $4.20. And the average one year ago was way back at $3.4. Remember those days? And it could get worse. Our Bob futures for gasoline are up 1% right now and 90% this year,

implying even more upside and hitting a new high today. Joining us now as former industry insider Joe Petrowski. He's the former chairman and CEO of Gulf Oil. He's also a senior advisor at Yesway, a chain of convenience stores. Great to have you here today, Joe. It's just going to keep going higher. What do you say? What's going to happen here?

Well, I think we're just getting started. I think we will see national average prices. sometime between July and August, so $5.50 on retail gasoline nationwide and $6 in diesel. I mean, I think the points I'd like to make today are Jamie Diamond was correct. There is a hurricane coming. The eye of that hurricane is energy. and there's really very little we can do about it now except Washington's trying to look like they're concerned in doing something,

but the dye is gasped. We're using about 18 million barrels to 19 million barrels a day, which is slightly down. There is some rationing going on, at least in the gasoline market. Not significant rationing, but over time, As people change their habits, there will be. And the other point I would make is it takes a while for the real effect of energy prices to get passed down the change. So I think inflation is not going to get better.

It's going to get worse. And inevitably, we will have a recession. I mean, you can't take $730 billion out of the U.S. economy over this year for energy. in a $20 trillion economy, which is almost 4%. And given the history of almost every energy spike was followed by a mild or severe recession, is just inevitable. So when you say that, Joe, let me just interrupt for just a second,

if I might, you say that there's going to be $730 billion coming out of the $20 billion. You're talking there about the excess money or the increment of money that will be spent this year on energy by American consumers, correct? Yes, Tyler. Incrementally, $730 billion. And to that, and that's not just fuel prices.

That's heating oil. That's all the components made from petroleum, like pharmaceuticals, rubber, plastics. And to that point, I think you couldn't be more correct. I think it takes a long time for the effect of rising. oil and petroleum and distillates and so forth to move through because it touches so many parts of the economy. So let me ask, let's say we buy your thesis here. What are you doing? You run now a large chain of convenience stores, and I assume some of them are associated with gas stations. What are you doing to prepare for the scenario that you see? Are you not hiring anymore?

Are you laying people off? What are you doing? Oh, no, our business has never been better. I mean, the consumer continues to drive, which is one of the factors behind this. We are hedging, and we are trying to create long-term contracts that will give us supply and also increasing our supply points, because you never know who's going to run out of oil and which refineries. And what are you doing with prices? What are you doing with prices, not in terms of gas.

gasoline sales, which are kind of baked into the cake. But let's talk about the cakes and the drinks and the other things you might sell at a convenience store. Are you passing along higher prices? Somewhat, but we try to hold our prices as best we can. But the consumer really does understand and is accepting slightly higher prices without a drop-off in demand. Yeah. All right, Joe, thank you so much for your insight today. we were very grateful to you.

Well, thank you. Thank you so much. All right, further ahead on the show, the jobs juxtaposition. The jobs report coming in stronger than expected with many companies still hiring, but tech sure isn't. We will discuss. Plus, poking the bear. We'll take a look at the stock leading the bear market bounds that may have more room to run.

We're right back. Time now for our ETF tracker. This week, we look at biotech. E-T-Fs. Why? Because we can. Twenty-five million dollars of outflows in the latest week, and as a group, biotech is the worst-performing group so far in 2022. But a couple of potential catalysts are here, an increase in M&A activity, as we discussed with the Bristol-Myers CEO, and also a very important conference came up there in that discussion as well on fighting cancer. It begins today. I believe it's out in Chicago as it almost always is.

Now, the I-Shares Biotech E-TF down nearly 3% this week. There you see it, I-Shares Biotech 2 and a third percent of thereabouts. The Arc Genomic Revolution ETF down nearly 4%, as you see there. How about the spider, SPDR, biotech? It is down one week about a quarter of a percent. But when you look at the year-to-date numbers, all of these funds losing at least, well, about a quarter of their value, or more. There, the I shares biotech down 23%, 47% for Arc Genomic and Spider-S&P biotech,

down 36%. This data comes from our partners at Track Insight for more information. You can look at the FT Wilshire ETF hub. Let's go to Simomodi now for a news update. Sima. Interesting data. Tyler, here's your new news update at this hour. Queen Elizabeth will continue to miss Jubilee-related events tomorrow. Buckingham Palace says that Her Majesty won't attend Saturday's Derby Horse Race. The Queen missed today's service at St. Paul's Cathedral after experiencing discomfort while attending yesterday's festivities.

She'll instead watch the Derby on TV from Windsor Castle. At least four people are dead and dozens are injured after a train derailed in the German Alps. The accident happened near a popular hiking destination in the country's Bavaria region. Local reports said that three of the carriages overturned and that many school students were on board the train. Singer-actress Jennifer Lopez will receive the Generation Award at Sunday's MTV Movie and TV Awards. The honor recognizes her many contributions to film and TV throughout her career. She got her first leading role in the 1997 film Selena and most recently starred in the movie, Merry Me. Among previous recipients, the Lifetime Award are Reese Ritherspoon, Sandra Bulk, Tom Cruise, and,

And Jamie Fox, well deserved. Kelly, back to you. All right, Seema, thank you very much. Ahead on Power Lunch, volatility insurance. Check out shares of Cigna, which has been having a strong run despite weakness in the overall economy. The company holding its annual investor day, we will hear from the CEO next. Time now for our ETF tracker. This week, we look at biotech ETFs. Why? Because we can. $25 million of outflows in the latest week. And as a group, biotech is the worst performing group. far in 2022. But a couple of potential catalysts are here and increase in M&A activity, as we just discussed with the Bristol-Myers CEO. And also a very important conference came up there in that discussion as well on fighting cancer. It begins today. I believe it's out in Chicago as it almost

always is. Now, the I-Shares biotech E-TF down nearly 3% this week. There you see at I-Share's biotech 2 and a third percent of thereabouts. The Arc Genomic Revolution, ETAF, EETF, down nearly 4%, as you see there. How about the Spider-SPDR biotech? It is down one week about a quarter of a percent. But when you look at the year-to-date numbers, all of these funds losing at least, well, about a quarter of their value or more, there the I-Shares biotech down 23%, 47% for Ark Genomic and Spider-S-NP biotech, down 36%.

This data comes from our partners at Track Insight for more InfoSTER, You can look at the F.T. Wilshire ETF hub. Let's go to Sima Modi now for a news update. Sima. Interesting data. Tyler, here's your new news update at this hour. Queen Elizabeth will continue to miss Jubilee-related events tomorrow. Buckingham Palace says that her majesty won't attend Saturday's derby horse race. The queen missed today's service at St. Paul's Cathedral after experiencing discomfort

while attending yesterday's festivities. She'll instead watch the derby on TV. from Windsor Castle. At least four people are dead and dozens are injured after a train derailed in the German Alps. The accident happened near a popular hiking destination in the country's Bavaria region. Local reports said that three of the carriages overturned and that many school students were on board the train.

Singer-actress Jennifer Lopez will receive the Generation Award at Sunday's MTV Movie and TV Awards. The Honor recognizes her many contributions to film and TV throughout her career. She got her first leading role in the 1997 film, Selena, and most recently starred in the movie, Marry Me. Among previous recipients, the Lifetime Award are Reese Ritherspoon, Sandra Bulk, Tom Cruise, and Jamie Fox. Well deserved. Kelly, back to you. All right. Seema, thank you very much.

Ahead on Power Lunch, volatility insurance. Check out shares of Cigna, which has been having a strong run despite weakness in the overall economy. The company holding its annual investor day. We will hear from the CEO next. Welcome back. 90 minutes left in the trading day and week. So let's get caught up across the markets on stocks, bonds, commodities. Plus, we'll hear from the CEO of Cigna. But let's start with Bob Bassani as it looks like stocks are about to book another down week, Bob. Yeah, down about 1%, but well off of the lows of a couple of weeks ago. I think the important thing is other than the inflation news and the jobs report is continual concerns out there about growth worries. So Micron was the worst performer early on. today. There were issues out there for them. Tesla, of course, had Elon Musk with a really bad feeling idea, the downgrade from Icon weighing on things. And of course, Apple, Morgan Stanley

noting about a slowdown in the app store's growth during May. So some growth concerns. Also, we saw some weakness in the airlines today. Even though the numbers were excellent, I mean, American Airlines had great comments, notifying revenues are going to be higher. They're raising prices to deal with higher jet fuel costs. Forget about it. lower airline prices anytime soon. That's certainly not going to happen, but they've been weaker throughout most of the day, along with most of the travel stocks that are out there as well. In terms of energy stocks, they're still holding up well, Exxon, ConocoPhillips, Occidental, all among the leaderboard as oil has been holding up very well in the $11, $15, $16 range.

So where are we right now? Well, as Kelly noted, it's down about 1% for the week, but we're about six percent off of the recent low that we hit. That was May 20th. So the big issue, of course, guys going forward is going to be any news on inflation. We'll get CPI fairly soon. And of course, we want to see some moderation from that 8 percent numbers that we've been seeing recently there. Those are going to be the numbers. Anything about inflation is what's going to move the dial. Guys, back to you. Absolutely. Bob, thank you very much, our Bob Bassani. So we have rates on the rise once again. But what do the traders think about it? Let's go to Rick Santelli out in Chicago. Rick? They think it was a pretty decent jobs report and rates were on the rise here and abroad.

Look at the intro of two year. You could clear a seat at 8.30 Eastern. It popped as it sits at 2.66. It's up 3 on the day up. 18 basis points on the week. Intra day tens at 296. Wow. Up 5 on the day. But get this through a one week chart. It's up 22 basis points on the week. And if you think that's aggressive, two year notes in Europe, closed up 31 basis points on the week, as did 10-year notes. The boons closed up 31 basis points on the week. Those are huge, huge moves. Remember, ECB next week. Now, if we look at what's going on with the dollar index, here's a chart going back six weeks.

We're near six-week lows, okay? But we're up a half a cent on the week. Here's the fly in the ointment. If you look at a 20-year chart, we've come off of basically 20-year highs to be roughly at 5-6-week lows at a time where multinationals are still feeling the effects of that mid-May spike at 104 and three quarters. Kelly, back to you. Thank you very much, Rick. Let's turn to oil now, which has been the headliner and continues to be that way today, closing around $119 a barrel, up almost 2% today, 3% for the week.

Markets balancing the additional OPEC supply, the additional supply that OPEC plus, I should say, is promising to deliver against additional demand from, China as the country reemerges from COVID lockdowns that has crude prices higher. As we mentioned a moment ago, gasoline prices higher as well. So if you're looking to play defense in this market, you may want to look to some of the insurance giants like shares of Cigna, which are up 12% this year to far outperform the broader market. The company hosting its investor day today and our Bertha Kuhm spoke exclusively with the CEO. She joins us now with those highlights. Bertha? Hey, Kelly. David Cordani is fairly bullish on the

market this morning. They raised their guidance in terms of the growth of their services sector, which is where they've made some acquisitions like MD Live. It's going to grow faster, they said, than even they thought earlier this year. As far as the prospect of a recession, we've heard Jamie Diamond say, brace for some kind of hurricane. And of course, Elon Musk saying he doesn't feel very good about the second half of the year. But Cordani says when it comes to employer benefits, he thinks that the market will remain strong. If we do embark upon a recession, we're going to be entering a recession off of an environment where employers are still looking to get to a level of full employment.

And I think that provides a little bit of flexibility where employers may slow down the rate of hiring, maybe stop the rate of hiring, and maybe have a little bit of dislocation. But for the employers we serve right now, they're still an aggressive growth to drive their employment levels. Secondly, if there is a recession or dislocation, oftentimes the services that we bring forward even more in demand. Helping employers keep their employees healthy, keeping them engaged, keeping them productive, becomes even more valuable in an environment of economic dislocations.

Those services are very important right now, as a lot of employers are trying to hold on to workers who may want to be part of the great resignation. One of the tailwinds for next year, it says, is blockbuster drugs like Humira's. We'll start seeing some biosimilars there. That's going to bring down costs. a bit. One of the headwinds for insurers and employers alike could be the expected overturning of Roe v. Wade by the Supreme Court. We saw that leaked draft come out. A lot of employers have been scrambling to try to figure out what they'll do. I asked Cordone if he thinks a decision

like that would be disruptive. I don't know what the final conclusion is going to be, right? So change is disruptive. And on this topic, it has a potential. for being significantly disruptive, our opportunity is to bring it back to one employer and one decision at a time because there will be no national solution for this. All health care is local and deeply personal. And our philosophy is to be able to enable that. And we work with employers literally one at a time. Kelly and Tyler, you know, some of the benefits managers that I've talked to have said that this really is one employer at a time. Every employer is grappling with it and they are all going to have slightly different ways that they are going to deal with this.

All right, Bertha, thank you very much. Bertha Coombs reporting. After the break, on the road to ruin, Elon Musk says he has a bad feeling about the economy. Bad feeling. He plans to freeze hiring, cut 10% of his workers, the stock. Tesla sinking on the news. Down what is that? 9% today?

All right. Is he right to worry? We'll discuss that next. Welcome back to Power Launch, the Jobs Report for May. coming in better than expected. 390,000 jobs created across the country. But that follows some grim economic comments from J.P. Morgan's CEO, Jamie Diamond, and Tesla CEO Elon Musk.

Diamond warning, there's a hurricane out there coming our way. Musk saying he has a, quote, super bad feeling about the economy. So are they right? Mark Morial is the former mayor of New Orleans and the president and CEO of the National Urban League. Mayor, welcome. Good to have you back with us. What are you seeing and hearing as you go around the country, apart from anxiety about inflation with respect to the economy?

You know, what I am hearing is there is anxiety about people's ability, notwithstanding a strong job market, people's ability to make ends meet, to pay their bills, rising housing costs, to afford food, rising food costs. and notwithstanding some inflation in earnings and wages, it's still not enough to make up for the many, many years that we had stagnant wages while we even had modest inflation. So there remains anxiety, but let's be clear, 390,000 jobs, this is a strong labor market. And this strong labor market and this post-COVID recovery has both been consistent. and it has certainly been strong and stronger than the last recovery after the great recession of 2008 to 2010. Yeah, I guess the good news is the labor market is strong. Incomes have been rising.

The bad news is they have not been rising enough to keep up with the rate of inflation. And as you point out, it is on food, it is on fuel, it is on consumer goods. And so if you're living paycheck to paycheck, more of, of your paycheck is going to what we would describe as essentials? It's still tough, but it's important to recognize that there's some global factors driving some of this. The war in Ukraine is impacting the energy market. The continued lockdowns in China are affecting the supply chain. China is a significant player when it comes to manufactured goods that we purchase here in the United States.

those global factors are beyond, I would say, the impact of American policymakers, but they are impacting the American consumer and American business in a significant way. Nonetheless, we have economic growth, we have job creation, but some factors like the differential between black and white unemployment remain the same. But we are better off than I would have expected post the COVID recession. Comeback has been. been faster, it's certainly been stronger. It's certainly a difficult equation for the incumbent party as we look to the fall elections. Whenever gas prices are as high as they are now, they're really at historic eyes.

They haven't been this high before. But when they move up this fast, it does not spell good news for the incumbent party, does it? It is a challenge, no doubt, for the Democrats, but here is the question voters have to ask. What is the alternative plan? What is the alternative set of public policies that might yield a better result? And I hope that there's going to be a debate about that versus sort of a referendum on the challenges that we face in a nation today. I wanted to just also comment on Jamie Diamond and Elon Musk. So I separate the two.

In Elon Musk's case, his business now faces competition. Tesla dominated the electric car market. now all of his competitors are introducing electric or hybrid or alternative type of vehicles. He has competition. He has not had before. And that's going to impact his sales and his bottom line. Elon also has a habit and a pattern of overstatement and hyperbole. Jamie Diamond, on the other hand, tie is a respected economic voice. I'm not prepared to embrace the profit of doomed scenario. But I do say that the average American should save money,

should take advantage of the fact that unemployment is low and perhaps with some of the stimulus funds, there's been more cash, to not just spend it all to the extent possible to save it, to provide themselves with a nest date. In the event that there's a shock to the economy, or we face some sort of economic downturn. So the message is for the American family, American consumers. Yes, money's tight.

Yes, things are tight. To take advantage and to prepare for the future. Do you, Mark, it's Kelly here. Think the Fed should be doing more, though? I mean, you must hear a lot about just how frustrated and scared people are about energy prices and food prices and shortages. You know, this is not something we thought we'd still be dealing with. And a former oil exec a moment ago told us he thinks gas prices are going to be $5.50 in another month or so per gallon.

You know, Kelly, it's always a delicate balance between Fed introduces tightening of the economy because they could overreact. And by overreacting, create a more immediate downturn in the American economy. So I think the Fed's got to be balanced. And they've got to be gradual in certainly what they do there. if you will, tailoring their quantitative easing program. They are raising interest rates almost at every single meeting. So I think they're doing things, but we want to make sure we don't create a stagflation-style economy.

We have a combination of high inflation and high unemployment and then high interest rates that are a damper on business investment. And so we've got to, in this instance, learn from the past. And I think the policies have got to meet the moment, if you will. All right, Mayor Morial, great to see you, as always. Appreciate it. Thank you. Probably see you next month.

All right. Bye-bye. Up next, a sinking arc. Kathy Woods, ETS, deep in the red. We'll explain what's dragging it lower now. It had a good day yesterday. Remember, different story as we close out the week. We're back after this.

Welcome back to Power Lunch, everybody. And let's take a look at the ARC innovation. which is back in the red today, and nearly all the components in the ETF are lower, led by Coinbase down almost 10%. Roblox, same story. Shopify down 11%, and of course, Tesla, down just under 9% right now. The ETF did see that nice bounce of more than 7% yesterday, but with this, we've now gone negative on the week with the loss, Tyler, of more than 5%. All righty. Up next, a tonic for tired stocks. Yes, what better tonic? We're going to highlight three names at a bouncing back from recent lows in today's three-stock lunch. We got your best buy. We got your bath and body works, and we got your T-R-O-W, ticker, trow. We'll be right back. Welcome back,

everybody. Time now for three-stock lunch, and today's CNBC Pro has a list of stocks leading the bare market bounce, but with more room to run. They're all still at least 30% off their 200-day moving average, but have a consensus buy rating on the street. The name include T-Roe Price, Bath and Body Works, and Best Buy. Here to trade them is CNBC contributor Gina Sanchez. She's also Chief Market Strategist at Lido Advisors. Gina, welcome. Good to have you with us.

Let's start with T-Role Price, big money manager, you know, a quiet player, but a financial nonetheless. Yeah, and this is a stock that's actually gotten beaten up with the rest of the financials. If you look at T-Ros' performance, it is performed in line. with other financials and banks, and they look effectively like their pricing in 2008, the 2008 financial crisis all over again. However, Lido owns this in the dividend growth portfolio, and for the dividend, it is actually a very good value. You know, this is a stock that we think has, just from a dividend perspective, a much higher price that can be supported. And that would certainly be a help for the performance that's experienced this year so far.

Let's switch gears now, Gina, and talk about Beth's going to happen because we're doing this and Best Buy. Bath and Body Works. What would you do with that stock? So Bath and Body Works is one that we think got beat up because they took quite a bit of investment, an investment hit into their supply chain as well as into their customer loyalty program. However, we think that those investments are going to come back over time. And if you look at Bath and Body Works, they have a global, rather they have an integrated, supply chain that is primarily North America-based, meaning that they're going to be able to defend as we continue to have supply chain concerns and even inflationary concerns are a lot

more contained as their supply chain is integrated on the ground here, North America. All right, let's move on to the next one, which is Best Buy. You see a lot of Best Buy stores closing. That's been part of their strategy, I suppose, for many years now. Yeah, this is one that we actually are a sell on. You know, Best Buy is one of those kind of consumer stories that doesn't hold up well in an inflationary environment. And a lot of the sort of pandemic-related, you know, home improvement decisions and purchases have largely already been made. And if you're concerned about money and you're concerned about expenses, buying a big ticket electronic item probably isn't. on the docket. So we think that Best Buy is just going to have a pretty rough time for the next 12 months. Do you know that company granularly enough to comment on its appliance business, which it went into, as you say, the home improvement trend seems to be ebbing just a little bit, but they have a lot of store space footprint in appliances now.

They do. And I mean, the challenge there, obviously, is not just, part of it is just inventory challenges. I mean, this is a company that's getting hit in every direction. So, you know, supply chain issues will hurt them. Inflationary issues will hurt them. They're going to get squeezed on all fronts. You know, and they had a lot of business that came from everybody upgrading their kitchens and doing, you know, making big improvements on the house.

So that was a tailwind. Now it's a headwind. What do you think, Gina, about the fact that we had an eight-week down run for the Dow, worst in a century? We put together one-up week and now we're in the red again. That's a hugely concerning trend. And I think that part of that has to do with the fact that the Fed, basically we started to hear signaling out of individual Fed members that they really don't have any desire to put a pause

on interest rate hikes, even though we're starting to see some, you know, we're starting to turn the corner in inflation and we're starting to see some of those numbers at least begin to tick down. They're basically saying that they're not taking their... their eye off of the, you know, rate hike ball. Yeah. So I think it's a really negative sign. A little bit of a bear market bounce last week.

And now back to what had been the usual. The drinks are empty. Gina Sanchez, thanks very much. We appreciate your time today. Time to go fill your glasses, everybody. Thanks for watching, Power Lunch. And closing bell starts right about now. See you next week.