Power Lunch - The Labor Market’s Hot Streak Continues 6/2/23

Episode Date: June 2, 2023

Stocks are jumping today, as you add a new debt ceiling deal to a much better than expected jobs report.The economy added 339,000 jobs in May, the 29th straight month of positive job growth. While the unemployment rate rose to 3.7%.Wages rose too, though not as fast as expected. We’ll dig into what the strong labor market means for the Fed & stocks. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good Friday afternoon, everybody, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson. Stocks jumping today as you add a debt deal to a much better than expected jobs report. 339,000 new jobs added to the payrolls in May. Compared with an estimate, $190,000. Unemployment rate did rise, wages up two, but not as high or as fast as expected. We're going to dig into what that strong labor market means for the Fed and for stocks. Kelly. Indeed, we will. Thank you, Tyler. Hi, everyone. First, let's check on the markets, though. Dow's up 684, pretty much at session highs. And actually, it's leading the way today and not the NASDAQ, which is up 1%. And it is coming on pace for its sixth straight positive week, by the way. The Dow and S&P, though, have bigger gains and are close to the highs of the day. The biggest gainers right now are in the materials and industrial groups. You should see, for instance, Caterpillar. Yep, there it is, up almost 8%. DuPont 3M with all similar gains. Tech not being left out, though. Meta, Apple, Marble. Microsoft all hitting new 52-week highs today. And bond yields are rising along with the stock market today. But again, that's not taking any steam out of this rally. It seems to all be a risk on. Let's get to Rick Santelli at the CBO for more. Hi, Rick.

Wow, there's so much more. You know, whether it was the $339,000 or the big revisions over 90,000 jobs we gained on revisions, I think some of the most important issues were the reversal on month-over-month average hourly earnings are half of 1% up 3-10s. And, of course, the notion, as you look at twos and tens intraday, that we are now at the highest level of unemployment going all the way back to February of 22, where it was 3.8 versus now's 3.7. If you look at twos and tens a week to date, you can see the tens are a little lazy. But on the week, we are now really shrunk how much lower yields were than last week.

We closed it 380 in 10s last week, so now we're only down 11. It was down double that. twos are only down six. And we're going to go talk to Chem here to see exactly what he thinks about the fact that the VIX is on pace to close at the lowest level since Feb of 2020. Hey, Jim, what's going on? Rick, how you doing? All right, so what did you think about today's numbers if you had to highlight what you thought was the most important features for our viewers and listeners? Some people may call it a soft landing. I call it stagflation, right? At the end of the day, the Fed's in a box. They've got a tough situation here. That's bad for liquidity. That's

overarching over the top, right? But in the meantime, you know, markets, people are short. You've got a little bit of a ball squeeze going on. You're going to do a June OPEX, which is very important. There's a lot of open interest in those puts that drives all this buyback. For the next week and a half, people know that, you know, those flows are coming. You said the magic word, liquidity. And I know in my house, when liquidity is bad in the kitchen sink, we get Drano. Okay? Well, I think Janet Yellen's going to have a Drano issue because many see as much as one to 1.6 trillion in bill issuance coming. And right next week alone, $100 billion in bills for cash management, $123 billion for $3.6.

He had $4 and 8-week bills, what, about $100 billion. You're looking at close to $300 plus billion, but of course not all of that is new, but where is it going to come from? draining the TGA at the end of the day as borrowing from the future. That's what we did. We pushed a bunch of liquidity into the system. It counteracted QT. But guess what?

QT is still happening. And now those flows have to flow out the other way. Exactly. $1.4.1.6 trillion coming out. That's direct, you know, out of the veins of the market. Oh, yeah. And that's a... It could come out of the reverse repo market.

Correct. Could come out of the money markets. But you're right. No matter where it comes from, the issue is the same. We need to replenish the Treasury General account. And we all know it's coming. It's coming. In the meantime, shorts are going to get squeezed.

A lot of the time, the way these things end is with a blow off top. Excellent. Real quickly, the VIX. Can you give us any enlightenment on the VIX? It certainly doesn't seem like it's going to be ramping up anytime soon. So because of skew in the markets, as you slide higher, you naturally slide to a lower ball. What we're seeing is actually, even though you've seen the VIX coming down, ball underneath and these strikes is going up.

And when you start to see market up, fixed strike ball up, which is what we're seeing, it's a time to be cautious. Awesome. Jim, have a great weekend. Kelly and the gang, back to you. He turns. Rick, great stuff. Thank you, sir. Rick Santelli. Let's take a little deeper into that stronger than expected jobs report. Look at who's hiring. For instance, professional and business services led the way 64K hires in May. Then the government, healthcare, leisure and hospitality all sounds pretty familiar. Here to break it down is Tom Gimble. He is the founder and CEO of LaSalle Network and national staffing and recruiting firm. Welcome. Good to be back in studio. You got to kind of settle the score, settle the debate here.

strong payrolls, bad unemployment. Oh, come on, guys. This was a great, no, there is no argument. This was a great report. Honest to God, sometimes Chicken Little is running around my TVs all the time. That's me. What are you talking? I know you want the bond rates to be high.

By the way, the market might be on my side. You tell me why stocks are up so much and yields are doing what they're doing today. Listen, we can talk about that they think that the Fed will stop raising rates, right? I mean, that's where you're going. I don't know. You tell me. Okay, so that's a good thing, right? Do we think that's a good thing if the Fed stopped?

We all want the Fed to stop raising rates. We think the economy can settle in. The economy's bringing on over 300,000 jobs, and because unemployment inched up 2 tenths of a percent, the sky is three-tenths of a percent. If it goes up five-tenths, we're in recession. It's never gone up five-tenths without being in recession. Okay, let's go back last year,

and we say that we were in a recession because of two consecutive quarters of negative GDP growth, which wasn't accurate because it was over 2020, which was a BS year, right? So we're looking at this now, and what we've realized is this economy, this world we live in today, that some of the old bellwethers to measure things are not accurate. Hard for me to see the economy in a recession unless unemployment gets well above 4%. For sure.

Well above 4%. That's 4% saying it today. Imagine what we would have said years ago. We would have said it has to be 5.5 or 6%. Right? If unemployment's at 4, 4 and a quarter, and people say, say it's a bad economy, I'm still going to say you're naysay. So who's hiring and who's not? Well, I mean, either by. I would tell you that everybody's hiring, Tyler. Big companies?

Yes, absolutely. Everybody. They're just not hiring in the areas of which the take Salesforce, right? Mark Benioff came out and said, oh, we've studied the numbers. Like they weren't studying the numbers for the past three years in that place. And he said, we found out that 90% of our sales are coming from 50% of our salespeople, right? They knew the exact same thing. during it. They track data better than anybody. Okay? What they realized was the economy didn't stay home as much as they thought. And what big tech thought was, we've got this figured out, people are never going back into the office, either that, or they did a bait and switch, and they just said, oh, we're never bringing anybody back, and now they are. There's a given take

with employers and employees, right? And now what people are saying is that the employees are running the market, right? I don't want to come in. I don't have to. Unemployment's still low. It's not true. What we don't, the employer still makes a decision, right? If you, you have a babysitter, nanny, what have you for your kids? Do they get to tell you where they're going to take care of their kids every day? They are fully in charge. I don't try. So if they said, hey, I'm taking them to my grandmother's cousin's house. They get to do that? I don't think so, Kelly. I don't think so. And so it's the same thing. The employees got to do that because of the pandemic and no one knew how to handle it. Now we're into a more stable economic situation and companies are saying, we want people

to come back in. And that's what we're seeing. Has the rate of wage growth slowed as well? Yes. I mean, in other words, it used to, two years ago, companies were having to really pay up a lot. They're still having to pay up. TOWS there's twofold on that. Number one, you have the hourly, number two, you have the salary. On the hourly, we saw a tremendous growth where, we all know what the federal unemployment or the federal minimum wage is seven, seven. which is really irrelevant because maybe in some small town in New Mexico they're paying that, right? But in the country, they're not paying that in major metropolitan areas. It went to a point where now Target and Amazon, $18, $20, $25 an hour and wages have caught up.

So we've got a situation. Now, in White Collar, you saw that someone would get a job offer for 30, 40, 50 percent more two years ago than what they were making. And that was out of desperation that companies needed to take advantage of this bull market. But if we take a step back and we look at the past 25 years, going back to 98, we've had a couple blips on the radar, economically speaking, but this has been a bull market from employer standpoint. It's crazy. Let's go back. Can we put that graphic back up there of all the companies that have done layoffs in the past year? Right, it was right over the – there it is.

Look. Look at that. Look at that. Okay. Recent layoffs. That's a lot of companies. In certain areas. But they're – I guarantee if you went to their website that they have positions that they're hiring for.

too. Yeah. And I think that's what, and the difference is, this is really an important aspect, is that 30, 40 years ago, the big companies, whether it was GE or Exxon, they laid somebody off, the people had nowhere to go because you were, you were industry focused, automobiles or oil or financial services. Today, if Netflix lets somebody go, Goldman Sachs will hire the person as a developer. Caterpillar or hire somebody as a developer, right? That's the biggest change that I see is that there are more companies today than there were 25 years ago. There are more startups than there were 25 years ago. There's more venture capital than there were.

There's just more opportunity. I don't see us getting to a situation, even if we get to 5% unemployment, that we're not still adding jobs in some aspect. Because what we're starting to see, and this is the question, how does unemployment take up 3 tenths of 1% and how do we have 300,000 jobs?

When you have 339,000 jobs. It has to be gig workers coming back, right? Actually, yeah. Right? It has to be the unreported worker who's doing delivering pizza and dog walking and all this stuff. And now has a permanent position. And now they've come back and they've said, you know what, I'll take salary, I'll take benefits. I don't know when the economy. Everyone's getting nervous. So I'll take the steady job.

Yeah. Tom, good to be with you. Thanks for having you back. In the house. It's nice to be in studio. Let's not use the P word anymore. No more pandemic. All right, okay.

Let's set that aside. Perfect. Tom, good to be with you. Have a great weekend. Thanks, guys. All right, our next guest says the economy dodged a bullet with the bipartisan agreement to raise the debt ceiling. For more now on the economy, the debt ceiling, the breakdown in the jobs number. Let's bring in our friend Mark Morial, former New Orleans Mayor and President CEO of the National Urban League.

Mayor, welcome. Good to have you with us. Let's start. We just talked about employment. We'll come back to that in a minute. Let's talk about the debt ceiling deal. Would you, would you have voted for it as it passed? I would have voted for the debt ceiling deal because while it doesn't include everything I would want to see,

I think it represented a step forward in that. that the big Biden economic plan lost no ground in this deal. And now not only is the debt ceiling solved, but we have some fiscal or budgetary certainty over the next two years. So the opportunity for brinksmanship, a government shutdown, or the utilization of the budget process for political purposes in an election year is much, much less. So would I like to have seen know, if you will, give when it came to work requirements? Of course.

Would I like to see greater domestic investments? Yes. But in all in all, I think President Biden masterfully crafted, if you will, a bipartisan agreement. And the votes in the House and the Senate demonstrate significant, if you will, majorities in both houses for this. deal. Significant majorities and bipartisan, there were a lot of, there were more Democrats in the House who voted for this deal than Republicans in the Senate, different story. But a very interesting outcome there. And I guess you would have to say that both sides won. One side won more than the other. Politically, no doubt. Both sides got something politically.

To some extent, Kevin McCarthy defied expectations. In other respects, Joe Biden skillfully did not give up any significant ground when at the beginning of this, McCarthy and the Republicans wanted a 10-year deal. They wanted significant cuts. They wanted draconian work requirements. None of that evolved. And therefore, I think what it demonstrates is that bipartisanship is not dead, but still difficult to achieve.

So we should celebrate the moment. The ultimate deal did not dismantle much, if anything, of what the Biden administration was able to get through in the past year. Let's go to the work requirement provision here. To me, it seems like a rather modest increase in the work requirements,

basically expanding the age under this, I guess it's the SNAP program for a to require people to have 80 hours a month of either work or work-related training? So it moved the age up to 54, I think, from 49. Correct. But what it also did was it expanded eligibility for people like veterans and homeless and people coming out of the foster care system.

So into some respects, it may have raised the age, but by expanding the eligibility, I think at the end of the day, the work requirement isn't going to be that significant. And there's an opportunity, I believe, for states to opt out. The larger question is why do we have to distrust Americans who need SNAP or need Medicaid and impose draconian paperwork administrative requirements on them? That's the broader policy issue. And I've opposed it because I don't think that at the end of the day,

most able-bodied Americans who can work are going to want to work. We should trust people a little bit more when it comes to this. Being that as it may, be that as it may, I do want to also say that the jobs report beat expectations once again, that the continuation of job creation in the performance of the labor market demonstrates why the gloom and doom caucus, which is basically been howling for over a year, that a recession is on the horizon. They've been absolutely wrong. And then I believe number three, with this jobs report, we should also understand that there's still Americans out there working part-time who want to work full-time and that there are many Americans in low-wage jobs who want to work in a job that pays better

or who wants to see that low-wage job give them a pay raise. So there's work in the economy, but I'm going to celebrate this report because it represents consistent progress when it comes to job creation in the labor market. Let me just quickly ask, Mr. Mayor, if you can shed any insight on we've seen major declines lately in some of the retailers. Dollar General, you know, Costco's talking about people trading down from beef to pork and canned goods. And, you know, OK, Lulu Lemon's still doing fine Nordstrom is too.

just what is the pulse of America? So the pulse of America is that working Americans don't have enough money to make ends meet. What I hear when I travel is I'm working one or two jobs, and I still can't pay the rent, can't pay the mortgage, can't take care of my household expenses. This means, and this is why, something as simple as an increase in the unemployment rate, I mean rather in the minimum wage, from a national standards basis to a living wage paradigm would help these Americans. So that pain of working Americans who can't make ends meet is the new big challenge in the American economy. That's very well said. We really appreciate your time being able to weigh on on all these topics today.

Thank you so much, Mr. Mayor. Mark Morial. Thank you. I join top market experts and economists at the virtual CNBC Financial Advisor Summit. But it's on June 15th. They will discuss market risks, potential buying opportunities, and tools that advisors can use to generate consistent returns while minimizing the downside. You can go ahead and scan that QR code on your screen. Get out your phone, do it.

I'm going to leave it up there for just a few seconds. I'm going to stretch a little bit here to register or visit CNBCEvents.com slash financial advisor. That's June 15th. I believe that's two weeks from yesterday. That was ample time. I think it'll be a good time. I can still do it. That's right.

Coming up, is Amazon getting into the telecom business or not? According to some recent reports, they are. But Amazon and Verizon and some others are all denying the news, although the stock are still on the move. We've got more in today's tech check. And let's get a quick power check with T-Mobile on the negative side of that news today, down about 7%. Lots on the positive side as DISH Network is having its best day since 2020 up nearly 15%.

Ahead on the show, more on today's rally with the Dow up just shy. of 700 points. Power lunch will be right back. Welcome back. Time for today's tech check. And let's do telecom stocks falling on a report that Amazon is thinking about launching a mobile phone service for Prime members. Some say it would even be free. Deerja Bosa has more and Deirdreja, the companies deny it. We've had CNBC's been reporting. That's not going to happen. And I don't know, but there's, there's been smoke in this space for a while now. Yeah, Amazon came out itself. Pretty clearly said that this is not something they were going to do soon, but they did leave the door open for the future, and that is enough itself to keep the carriers under pressure today, as you were alluding

to T-Mobile and Verizon, telling C&BC also that they are not in discussions, but they arguably have the most to lose in such a deal. Competitive pressures. Dish, on the other hand, has more to benefit because it is trying to transition to become a national wireless carrier, so maybe more open to a partnership. So you do see that dynamic playing out on those stock prices today. On the Amazon side, this is as often as all about the prime ecosystem, making it more appealing to members, bringing on new ones in a market that is getting pretty close to saturation. It started with free shipping, but of course has expanded to video, music streaming, Thursday night football, gaming, photo storage, grocery perks, and it is that ecosystem that is so attractive as well

to even companies that Amazon would potentially compete with and eat their lunch like the telecommunications companies, like others in the past, like in a firm that partnered with Amazon and buy now, pay later, that kind of creates this dynamic where they partner with Amazon, even if there's a chance that Amazon comes for its business. I would assume this would be the kind of spectrum leasing deal that some other companies have with the big carriers that own the spectrum, whether it's an AT&T or Verizon or a T-Mobile. Is that how this would presumably work? That is what the reporting says, that it's in talks. with the traditional mobile carriers,

but Amazon has its own moonshop projects, right? It's looking at its own satellite system that could potentially eventually deliver some kind of service. So that is something, too. I don't know anything if they're ready or if that's a possibility, but sort of like a Google, like some of the other big tech giants,

they're working on doing it themselves. That's very interesting. And of course, I guess there's a little template there. I see so many Amazon trucks now, which is, and he used to rely, almost exclusively on the big carriers, FedEx, and UPS. Now they have their own fleet. So who's to say they couldn't build their own mobile network?

Deirdre, have a great weekend. And that's exactly it. They can partner with them, learn, and then do it themselves. That's the Amazon opportunity and the threat. All right, that's what they do well. Thanks very much. Deirdre Bosa. Further ahead from Bed Bath and Beyond the Grave.

Bye-bye baby, drawing interest from at least two bidders as I think is, are you one of the bidders? You know what? I might be. You might be one of the bidders. The parent company, as its parent company, Bed Bath and Beyond, works to auction off assets and keep some form of its business alive. Plus take a look at some of the retail names leading today. Big Lots up a whopping 24 percent. Macy's and Coles also seeing some big moves.

Up next, we're going to break down some of the biggest tech names rallying today. It seems like the old tech giants are today's winners. Powerlund. Be right back. Welcome back to Power. Our lunch, the doubt almost touching a 700 point gain at the moment. If we wait long enough, it just might happen up 699 after this morning strong jobs report. Let's get to Christina Parts in Nevelis for a check on tech, one of the strongest parts of the market, Christina.

Yeah, let's start with the NASDAQ because that's where I'm at, where I'm at, and it's heading for six straight weeks of gains. Something it really hasn't done since, what, January 17th, 2020. That was literally three days before the U.S. reported its first COVID case. Oh, how far we've come. But the current rally is really just concentrated on a few names with, else an AI focus. If we look at the point impact on the NASDAQ 100 on a week-to-date basis, it's literally just four names, Tesla, Apple, Amazon, and Meta, contributing almost 70% of the gains. And three of those names, Kelly, you mentioned at the top of the show, Microsoft, Apple, and Meta hitting 52-week highs. There were our, are a few tech names that stand out today,

Sentinel 1 still plunging, what, 36% after the cybersecurity firm missed revenue expectations and cut its full-year guidance, weak demand and high operating losses. hitting margins. And analysts right now are rushing to downgrade this name further adding to the sell-off. Then you have software firm, PagerDuty heading in the same direction. That's down, what, maybe 17% right now citing smaller deal sizes and buyer hesitation. Management also cut their revenue outlook. But that's not the case from MongoDB, a database, a database software provider that is surging right now. 27% on a raised financial outlook, the company was able to add customers, despite this weaker macro narrative.

Tyler. All right. Thank you very much. Christina, with a lot of the attention focusing on AI and big tech, small caps seem to be getting a little bit lost in the shuffle. According to our partners at Track Insight, small cap funds seeing outflows of $500 million in the latest week. Some of the big name funds in the space rallying today, however, I shares, Vanguard and Schwab among them, as you see, up about 3% in each case or better than that. But if you look over the past three months, the names are all lower compared with the 15% game for the NASDAQ over that time. For more information, visit the FD. Wilshire ETF Hub.

And ahead on Power Lunch, Pharmaceutical Intelligence, Jeffries out with a new note laying out 10 areas where AI could transform biotech. Welcome back to Power Launch as AI gains traction. The biotech industry is one of the players poised to benefit, helping it, innovation of drug treatments and therapy advancements. Our next guest has 10 predictions on how AI could transform the biotech business over the next 10 years. Michael Yee is an equity analyst at Jeffreys, and he joins us now with more. Michael, welcome. Good to have you with us.

I want to play a little tape from the last hour of Bristol Myers CEO. Let's listen to what he said, and I want to get your reaction to it. It's an area of intense focus for us. We've invested in this space for many years now. And I do agree that the use of artificial intelligence, machine learning, can transform, actually, our industry from discovery where we may be able to discover new molecules faster with more precision. I believe there are tremendous applications to accelerating clinical trials. Let me bear down on that last point, accelerating clinical trials and how AI would do that and whether AI ultimately could obviate. the need for human clinical trials.

What do you think? I think you're spot on. I mean, I think that part of the genesis of the report that we had out talked about looking ahead over the next 10 years and thinking about all of the transformations that AI could have on the biotech industry. I think that starts exactly with what Gianvon was talking about, which is improving the patients and enriching clinical trials to best figure out how a drug is. works in which patients, by looking at databases and figuring out which of those patients are best suited,

to figuring out how a molecule could be better and more powerful, more efficacious and safer, generated through data using artificial intelligence, and speeding up what is a 10-year, $1 billion project to Tyler. We wrote in the note immediately. I mean, think about a period where you can just ask in artificial intelligence program to best identify the molecules that would work. So I think there's a whole swath of opportunities over the next decade, and it's a pretty exciting opportunity to think about. I'm not sure whether you're saying this or whether you're not saying this, but as a potential consumer of a drug,

I guess I would draw comfort from the idea that the drug had actually been tried out on human beings and had been shown to be safe and effective. not rely merely on a machine learning model to tell me that it is so. Yeah. Well, I think it's an evolution, certainly step by step. I think, you know, in 10 years, let's see how fast technology develops. I would use the analogy of, I don't think, Tyler, 10 years ago you would have asked, could you have a partially self-driving car? And of course, Elon is still talking about a self-driving car. That would have been crazy to hand over a machine. So I think the idea at the first start about enriching patient selections to figure out how a drug might work best to improve the odds success is one step, improving it using AI, and then eventually testing it in a human would be the next step.

So we still have different ways to go, but I think that's all very exciting, certainly for the industry and for patients. Michael, will this benefit big money incumbents or startup Maverickie biotex more, do you think? I think it's both. I think if you asked companies like Bristol Myers, which you did, if you asked Amgen and Moderna, I think that they are in the early stages of trying to determine using patient data how a computer could identify which genes are going to be the best to go after. I think if you then looked at early stage company, there's a lot of startups. I would say even some public companies like Schrodinger, which we mentioned, which is

partially the 10% owned by the Bill Gates Foundation, but other private companies, that are trying to look at this with data and then improve the odds of success. So I think we've got an exciting 10 years, but it's the small company is working on this, the big company is working on this, Kelly, and I think that's going to be exciting over the next 10 years. How can regulators sort out the use of artificial intelligence in drug development? This is such a thorny and loaded area where there's really no precedent. So, you know, there's a set of preconditions that go into this. There's, you know, efforts to kind of pioneer something that's ever been tried before,

safety is always the obvious kind of question being at the back of this. I'm just curious what that regulatory approach might look like. Well, I think that's obviously the critical part. And I get to go back to everything is going to require a lot of regulation. Of course, AI and chat GPT right now, right, being debated on the hill about regulation. But I think it's step by step. One of the things we pointed out is perhaps reducing the need for animal, preclinical trials, right, to reduce that. And then, of course, later down the road how we would do that without even testing human clinical trials. So again, I think it's step by step, Kelly. One of the things is certainly just enriching clinical trials to find the right

patients, but still testing in humans. And as that becomes even greater and greater probabilities, we'll go step by step to reduce it from 10 years to 8 years to 5 years to 1 year. I think that's where you could be in the future. All right. Michael Yee, a glimpse into the future. Thanks for joining us today. We appreciate it. We have a news alert on a situation out at the West Coast ports. Lorraine Luraco all over at Forest. Lorraine, what's going on today? Well, Kelly, select shipping terminals along the West Coast are being closed as some union longshoremen aren't showing up for work after a breakdown in negotiations over wages. According to the union, some rank and file members have, quote, taken it upon themselves to voice their displeasure with the ocean carriers and

terminal operators position. However, cargo operations will continue. The port of Oakland officials tell us that their main terminals are shut down due to insufficient staffing. Sources tell CNBC the situation is similar in Los Angeles, where trucks are being turned around from the terminals. No word on whether how long this situation will continue. The longer the ports are disrupted, though, the longer it will take to clear out any backlog. Kelly? Very interesting. Lori, thanks. We'll keep an eye on it, Lori Ann LaRocco.

Quick check on the market says the hot jobs report. Well, I mean, 721 now. Their rolls were hot. The unemployment rate, we'll leave that for another time. Debt deal done. That's right. It's warm out. The S&P is up to 4285.

The Dow's on pace for its best day since Jan 6, and the NASDAQ is hitting a new 52-week intraday high. After the break, we'll hear from the CEO of a tech startup that's disrupting HR and helping. firms recruit talent around the globe. We'll be right back. Welcome back. Today's jobs report show to labor market that's still pretty much under pressure. There's worker shortages. Today, John Ford brings us up close with the CEO who's helping companies quickly source affordable talent around the world. Sounds like fiber practice.

Well, but that's outsourced. Right. Well, this kind of is too. Frank Calderoni, is CEO of Velocity Global, a company that helps its customers quickly hire and manage employees in new locations around the world. Calderoni knows the challenges of balancing the cost of talent and the need to grow. Before he was a CEO, he was chief financial officer of Cisco, Red Hat, Sandisk, and others. Part of the reason he ended up in finance was he was concerned about employability. Calderoni's first love was media, filmmaking, and radio. Then I got all this advice from so many people like, can you really have a career in filmmaking and the challenge in this. And so as I went down, I went the safe route, I thought, which was,

okay, let's go into the finance world. And I went to Fordham University here in the city. And I went into the college business administration. And so I got interested in finance and accounting and all that. And so that kind of started my whole career in the financial side. He's on the Adobe board now, so he still gets to tap his creative side. Frank told me that after post-COVID resignations, companies aren't just looking overseas for talent to save money. They're doing it because even with improved salaries and benefits, they can't always find a big enough

pool of domestic workers to fill the roles they need. Looking more broadly for this talent. And I think from the perspective of getting that talent at a good cost, with the right type of structure in place, that's where there's a need. As far as markets right now that I think I've seen, even in the last, more recent times, is South America. Many companies are now looking at South America, ourselves included, We just opened a design team in Brazil. Brazil seems to be a hot market. Argentina seems to be a

hot market. Again, looking for other talent because it's limited in, let's say, the United States or in Europe, and kind of broadening out from that perspective, you can get great talent at a reasonable cost. It's an aspect of the remote work equation I think we're likely to hear more about, especially if the economy continues slowing in the back half of the year. Yes, some companies are bringing domestic workers back into the office, but for some roles that can be remote, they're also deciding to put them in the most affordable locations. And that might not be Idaho, might be Costa Rica. So let me understand how they operate. Do they become effectively the employer of record for, let's say I'm Cisco, but I want to employ staff in Sao Paulo? Yes. I work for them,

not for Cisco, but for his company. Because the argument is, he says it can take one to two years to from scratch set up a brand new office in a new country, you know, all the taxes, the regulation, the paperwork. They're already set up. They'll pay people according to your scale under your policies and you can get up in weeks. Is this, you know, there's been a lot of talk about how as we resure the manufacturing base, we might be all, you know what I'm trying? Yeah. The white collar workforce. Is this part of that? It is. And we talk a lot about AI lately. And that is certainly a force that's putting pressure on certain parts of the domestic workforce,

offshoring is another piece of this. Part of what remote work proved is, yeah, you can get a lot done from far away from the office. It can be really, really far away from the office. So even though right now the jobs market is still tight workers, probably we're taking the long view, thinking about yourself, your kids, think about three to five, ten years from now.

It's not just about AI. It's increased competition from offshore locations where they're happy to zoom in cameras on. I was talking to a CEO a few months ago who said, hey, his Costa Rica employees are really highly engaged. And so... You know what? I'd be like, why don't you send me to Costa Rica and I'll be engaged too? But he's not going to pay you. Right. What New York, New Jersey rate? Yeah. You have it on the pulse of a very hot button issue with this one, John, absolutely. Thank you, John Ford. All righty. AT&T on pace for a seven

straight week of losses after those reports Amazon could offer wireless services. We'll trade T, the shares of that company and other big movers of the day in three-stock lunch when power lunch returns. Time now for three-stock lunch. We trade some big movers of the day. First up, Broadcom higher after topping second quarter estimates at Chipmaker's CEO, noting that AI initiatives are going to account for more than a quarter of the company's total revenue in 2024. Shares coming off their best month ever, jumping nearly 29% in May and have nearly doubled from their 52-week low. That was back in October. We're here with our trades today, Shelby McFadden. She is senior investment analyst at Motley Fool Investment Management. Shelby, what do you think of Broadcom here at its current price? Yeah, you know, when I see Broadcom, I'm seeing a buy. And the reason for that is going to be that they are more or less a sort of utility company

when we think about how useful these services are and the broad range of services that they deliver in our day and age. And when you think about the fact that they are now being given this sort of supercharged opportunity to go ahead and get on a growth ramp. After largely delivering, mostly on income and being more of a value trade, I think that's a huge opportunity for the company. Now, we still have a long ways to go and to get more clarity on what the road for AI looks like. But if we're looking at a company that already has a lot of scale that has been operating

for a while, has gone through a lot of different environments and has been agile throughout. And they're giving an opportunity to sort of, you know, ramp back up again. I think that's what makes Broadcom a bit attractive today. All right. Is Lulu Lemon? They were surging Shelby on blowout earnings. Those sales were up 24% year-on-year. Revenue from China was up almost 80% from last year, having its best week since March.

Would you be a buyer? You know, for Lulu Lemon, I'm going to be a hold. And that's because when we're looking at these trends, especially those that are really making the stock lively and making the results lively, I need to see a couple more quarters of that going ahead and continuing. So what I'm thinking about the re-acceleration in China, I'm knowing that over a couple more quarters, we will have cold and flu season. And I'm also knowing that over a couple more quarters, I want to make sure that that economic growth coming out of China is not, you know, declining too severely.

Lulu Lemon does benefit from being a sort of affordable luxury brand. And so we know that there's more of that sort of resiliency coming out of North America as well. But I need to see that there really is a sort of fundamental resilience there and that it's not necessarily just a macro wave. So not completely negative, but want to make sure that it's going to hold on that excellent performance. All right. Let's talk AT&T, which is lower after reports that Amazon may start offering wireless service to prime members. A company AT&T down 17% in 2023 on pace for its fourth straight year of losses. Shelby, what do you think?

Yeah, AT&T is also going to be a hold. And you're absolutely right. It has been a tough 52 weeks for AT&T. We know that they went ahead and started with a lot of that sort of strategic overhaul and restructuring after they sort of lobbed off those. media divisions wanted to start paying down that debt, AT&T has been punished week over week. And I think in this case, they may be being overpunished once again. AT&T really does deliver on income. This morning, they're sitting at over 7% dividend yield.

It really is a utility type, almost commodity-like service. And they're mature in their space. And they have a prowess in their space. So they do deliver on their best product. And then not to mention the fact that should this partnership continue, there's not a guarantee that Amazon and DISH will not face any sort of side looks from the regulators or any other barriers to successfully entering the space. So I think AT&T may be unduly punished here, and that's why it's going to continue to be a hold for me on income generation and maturity. All right. Let's hold it right there. Shelby McFadden, thank you very much. We appreciate it.

Great. Thank you, Shelby. It's almost closing time for us, but maybe not for one retailer on the brink. CNBC learning that Bye Bye Baby is drawing interest from at least two bidders as parent company bed bath attempts to sell assets to stay alive. Details on that and more when power lunch returns. Welcome back, everybody. Four minutes left, a little less and a bunch more stories you need to know. Let's get right to it. We'll start with the paradox of AI's power. We often hear that the technology will eliminate a lot of jobs. And by the way, Challenger Gray in Christmas says it was responsible for 3,900 job losses last month. But it could create jobs too. J.P. Morgan advertised. 3,600 AI-related roles globally between February and April tie.

Fascinating stuff there. My guess is that in the end, the net increase to employment will be greater than the decrease. But those jobs will likely require high skills. And they'll be different. It's not actually about the numbers. It's about what happens to the people caught by the churn in some ways. Yeah. Who gets disintermediated, as the fancy word goes.

The math professor turned hedge fund billionaire James Simons donating a record $500 million to Stony Brook University out on Long Island. The contribution made on behalf of the Chair of Blue Foundation overseen by Simons and his wife, Marilyn, who is a Stony Brook alumna. The couple met and fell in love on campus some 50 years ago. The half-billion dollar donation reportedly the largest unrestricted donation to a college in U.S. history. I believe Mr. Simons was a professor there in the math department before he set off on his quest at Renaissance. Is it too much money for one school? I don't know that

school would ever say there's too much money. But I think as part of a matching program, this whole this donation sort of sort of nets up to more than a billion dollars. Really? Yeah, through state and federal sources. Maybe if you want a scholarship. Yeah. Place to look. And we have news out of the bed bath and beyond bankruptcy. The bye-bye baby name may live. I always thought this was the strongest part of it, but that's just me. CnBC.com's Gabrielle Frone Rouge is here with the detail Who wants it?

So there are two bidders so far. There could be more, but we've confirmed that there's two different bidders who have expressed an interest to buy, buy, buy, baby. It has long been seen the most viable aspect of bedbass, broken business, like you said. So the first one, it's an unnamed bidder. They're an independent operator of several complementary retail chains. They claim they have the staff and the experience to operate the business as a going concern. They actually want to keep stores open. I was going to ask you, do they want to keep stores or do they really just want,

a digital footprint? No. The other bidder does, which we'll get to that. But this unnamed bidder, they want to keep about 75% of the 120 doors open and they actually want to keep it running. Wow. So who's the other bidder? The other bidder is Baby List. This is a DTC online retailer. They are basically an online baby registry website. Wait, I think I used them. You might have used them. Yes. They are kind of what, it's the destination for modern parents these days. And they just want to buy the trademark and the domain. So basically when people would go to buybybiby.com, they'll be redirected to baby list. What they get with that is the name recognition. Pricing? Do we know anything? We don't know the pricing. We do know the unnamed bidder needs

some extra capital to be able to secure the deal. So they're asking for an extra $50 million in investments. They already have one secured investor, but they're still looking for one more. This is the one who would buy the stores and operate the stores. Yes. And when's the deadline? The deadline for the stocking horse is going to be June 7th. So they're entering in as a stocking horse, which is going to set a floor price for the bid. After that, the final bids and the auction is going to be later on in June. To our knowledge, no one is bidding for Bedbath and Beyond or those assets. So what we've heard is that people are interested in its digital assets, but no one is really interested in its stores.

It's really considered a broken business. Bye-bye baby. It's the crown jewel of the empire. All right. Gabrielle, thank you very much. Thank you. with that. Yeah, it would be very interesting. All right, thanks for watching Power Lunch, everybody. Look at that with nine seconds to spare. How do you like that? That's just a... We're going to hand it off to Scott here. Scott can have it. Closing bell starts right now. Take it away, Scott.