Power Lunch - Tracking the Transports, and Buyback Blowback 1/26/23

Episode Date: January 26, 2023

We’re tracking lots of headlines in the transportation sector today. Three major airlines are reporting results, plus Tesla is surging after topping estimates & Elon Musk’s conference call. We’ll break it all down. Plus, Chevron just announced a dividend raise and $75 billion share buyback plan. And the White House wasted no time in attacking the move for lining the pockets of wealthy shareholders. We’ll bring you all the details. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good day, everyone, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson. Coming up a ton of transportation topics to talk about three major airlines reporting results, plus Tesla sorting almost 10% after its numbers and Elon Musk's conference call comments. Plus buyback blowback. Chevron announcing a dividend hike, a $75 billion buyback. Its shares are up, but the White House is wasting no time in attacking the move for lining the pockets of wealthy shareholders will handle that hot top. First, let's get a quick check on the markets.

We see green across the board today. Even the Russells have turned positive, the NASDAQ leading the way up 1%. The Dow up 83. Dom Chu, green like my tie, sir. Green like my tie. What's my tie? It's like blue today. So Tyler, Kelly, to your point, let's expand on some of that.

You can argue the biggest headliner and influencer in the markets right now is Tesla, as Tyler mentioned, the biggest move higher on the day in mega caps in any sector, and second best performing stock in the entire S&P 500 behind. only see gay technologies after the electric vehicle maker top profit and revenue gas missed after the closing bell yesterday. Investors did shrug off profit margins at the lowest levels in over a year. And by the way, since the lows earlier this month in Tesla, it's added, get this $160 billion in market value. So watch that. Also in the mix, as Kelly points out, Chevron, the oil and gas giant, the biggest percentage gainer in the Dow, biggest point

contributor on the heels of its dividend boost and $75 billion stock buyback, though the Biden has voiced its displeasure with the idea that Chevron is returning money to shareholders instead of investing in more fossil fuel production. Chevron reports, by the way, earnings after before tomorrow's opening bell. And we'll end with a little bit of symmetry in the Dow. Chevron on the green side, but then big blue IBM on the downside, you can see there. After a relatively inline earnings report while announcing job cuts itself, IBM is the biggest laggard in the Dow on a biggest point percentage basis and also point basis as well. So Kelly, keep an eye on those. I'll send things back over to you.

Thank you very much. We've had a ton of headlines in the transportation space. Airline earnings from JetBlue, American, and Southwest, Southwest, by the way, shares down 4.5%. Boeing, Arraigned in court, the Department of Transportation probing Southwest, Tesla's earnings beat, and Toyota's CEO and president stepping down. Wow. Let's start with the airlines. Phil LeBoe, along with CNBC.com airline reporter Leslie Josephs, join us to talk guys about some of the, Phil, what's the standout for you today? What do you think is what we're going to come to look back at as the overarching piece of news here? Oh, Southwest, without a doubt.

Look, this was a much wider than expected loss. And not only that, you can see the lingering impact from the scheduling meltdown the last week of last year. In the first quarter, it's going to be about a $300 million hit. Now, when we talked to Bob Jordan earlier today, he said, hey, look, a lot of that is because people had schedules that got canceled, disrupted. Therefore, they had to cancel trips in early January. The first quarter is slow to begin with. There's your $300 million impact, but things improve starting in March. We'll have to see.

We'll see as we get a little bit closer to the end of the quarter. Do their bookings improve? Will their customers, who are known for being extremely loyal, do they come back to Southwest? Because there's no doubt this has been a major impact that has lasted long beyond the end of last year. Leslie, isn't it the brand damage that's been done in part to Southwest? Phil rightly points out that Southwest has a very loyal customer base, but a lot of that loyalty was squandered there during that meltdown. And I think Southwest executives know this.

You know, they handed out 25,000 rapid rewards points, and that's worth about $300. And they say there are a lot of redemption. So, you know, passengers often will say, I'm never flying this airline again, and then, you know, spring break comes around and they're booking them. You know, time will tell they're already seeing some cancellations and the slowdown in bookings in January and February.

So we're going to have to see in March. But when you say redemptions, you mean the sort of free points they're handing out? People are already using to book new fairs? Yes, exactly. So they are looking kind of to later in the year and maybe, you know, spring break, other holidays are rolling around and they are looking to use those. Do many travel agents book on Southwest? Because I was speaking to a travel agent not long ago who said,

we just don't book Southwest anymore. Well, Southwest, you know, they do drive a lot of traffic to their own website. You know, they have been kind of closed off compared with maybe some of the other airlines. There's very little commission with booking airline tickets for travel agents anyway, the big money's in the hotels. So there, you know, there is that. So it's probably being told something they didn't already do anyway.

They probably didn't book with Southwest much before. I mean, it is possible. And, you know, they do offer packages and things like that. So it is, you know, that there is a chance of that. But passengers don't have a lot of choices with airlines anyway. You know, it's four airlines that control, you know, more than three quarters of the U.S. market. Exactly. And, Phil, they're having a great year so far.

Like we said earlier, Alaska's, up 18%. What to you is the real barometer here of demand, capacity, and can this be an area of the economy that's sort of hanging in there, so to speak, and doing okay right now? Well, it's not only doing okay, Kelly, it is showing that it expects to remain strong. There is no indication that we are seeing the type of slowdown in demand that people have forecasted or warned about, especially with the possibility of a recession. Now, is it possible that we could see demand slow down if there is a recession, even a mild one in the middle of this year? Yes, that is possible, but nothing is being shown to the airlines in their forward bookings or in the intentions of

corporate America to pull back on travel. So at this point, it remains really one of the healthiest sectors of the economy relative to everything else that's going on. Yeah, and I would point out that their pricing power is enormous. I mean, I just tried to book some travel out to Tucson, and it literally would cost less to go to Europe than to go to Tucson from the New York market and back. Anyhow, Phil, thank you very much, Leslie. We appreciate it. All right. Now, let's get to the airline trade.

David Vernon is a senior transportation analyst at Bernstein. David, welcome. Good to see you with us. A lot of news in the airline world to talk about, but why don't I just cut to the chase here? Why don't you tell me what airline would be your favorite stock buy right now and why? I think it would be American or Delta coming out of earnings, largely because they've got more limited KAPX needs right now. I think the biggest equity upside in the short term here is going to be through de-everaging and balance sheet repair. And both those companies are in a much better position to do that.

You contrast that with the story at United, where they're undergoing a big fleet modernization program and Southwest, who's going to be spending a lot to try to kind of modernize its systems and avoid the type of disruption that we saw in the back half of December. I'm surprised American, David, because it feels. more risky because of the high debt load. I mean, I take your point about the de-leveraging, but do they look okay balance sheet-wise at this point of the expansion? No, but they're going to look a lot better in a year because they're going to be generating free cash flow this year. They're going to be, they're not going to be spending more in

CAPEX. They're going to be able to start to de-leverage. They're looking at sort of net credit metrics that are back at 2017 levels by the end of this year. That still may be a little bit elevated to fears, but it's certainly going to be away from the nosebleed levels that we've been at for the last couple of years in that stock. And as the equity risk profiles come, as the credit risk profile starts to come down, I think you're actually going to see some relief priced into the equities. But even if we had into a recession, I mean, I know that for analysts, it's like, listen, that's a binary question.

If we're going into recession, you throw this out the window. But it would seem to me that now might be the last time you'd want exposure to companies who are on the riskier portion, you know, of the credit curve versus those who might have the more of the stallwart, the balance sheets where if things take a turn, and the economy is slowing and maybe that makes that that calls that thesis for America into question somewhat? It's certainly part of the risk, which is why the stock is trading at four times cash flow for this coming year. But if you think about the potential for demand to stay a little bit stronger for longer into this slowdown, mild recession, whatever we're heading into,

if we're in a standard recession where capacity in the industry was very, very high, pricing was and utilization was very, very good, you're heading into recession. You'd have a lot of potential de-leveraging happening in the industry as demand kind of came off. Right now, the industry is still running at processionary levels of demand. Business travel hasn't recovered. There's still pent-up demand for travel that has not been fulfilled. And given where prices are, I think you actually have some travel that maybe is still getting pushed off. Plades are full, prices are high. So travel, remember, is more of an affluent service product. This isn't the type of customer that is going to be trading down mostly for private label products or filling up a gas tank half full.

Travel is a little bit more of a premium product. Those consumers balance sheets tend to be a little bit better. And if we do get to the back half of the year, we start to see the Fed kind of easing off on some of the industry tightening. I think you're going to be seeing that this recession looks very unlike any other airline recession you've seen. It's going to look a lot of people still going on vacation. Give us a quick thought on Southwest. You have it as an outperform. What do they need to do? or are they doing it? Is this a case of this is a company that's already taken its weapon? Well, look, I think the airlines are going to trade as a group,

and it's hard to get sort of stock specific here. They do have some mediocratic issues. The earnings and results were a little bit worse than we were expecting. We still need to process through all that kind of stuff. But I would say from an investment standpoint, they'd be at the bottom one of our list right now, only because they're going to have to go ahead and prove to the market that they don't have a lot of excess OPEX or IT spend

that they need to put it into business to prevent some of these problems. They took that at the calls today. I'm not sure it rang true. David, thank you very much. We appreciate your insights today. We'll have you back soon. David Vernon. Thanks a lot for having us. You bet. And let's turn now to the auto space. We've had some big news there as well. Let's break it down with CNBC.com autos reporter Michael Wayland. We've got to start with Tesla, Michael. I mean, what else is there to even talk about? This one is so fascinating because you have a stock up 50% off the lows and people who keep insisting this quarter was nothing to look at. How are you analyzing it? You know, Kelly, Tesla has always been an anomaly in the automotive industry,

not because they just sell EVs, but also Elon Musk and the fandom that they have. And the most recent earnings, the positive, positive kind of profits, even though they were lower on EVs, as well as the price cuts that they recently did, it puts so much more pressure on traditional automakers like GM and Ford to not just make EVs, but make them profitably, which they are far from doing at this point. Yeah. Still, though, I mean, you know, we've had even the headlines yesterday where Musk might be trying to sell or to sort of pay down Twitter debt.

How is he going to do that? Is there going to be a second day? No, he says no. So then what does that mean for him selling Tesla shares? What do you think is sentiment around the stock after we've gotten through this quarter and the profit concerns that people had going into it? You know, Tesla, they're always concerned about Elon. They're concerned about the company.

But overall, at the end of the day, they're an automaker that does software extremely well. And we've been seeing the investors react to that right now. I mean, shares are trading the double digits, the traditional automakers will be killing for that kind of quick hit and that type of quick increase when they hit a profit like that or when they beat. But right now, Tesla still is pretty much in a leak of its own when it comes to kind of investors as well as EVs in general. We keep talking about EVs coming, EVs coming, EVs coming. But at the end of the day, Tesla sells more EVs than anyone in the U.S. That's kind of coming down a little bit, but they are still a leader outright.

I'll tell you, when you drive around in this market in the Northeast, you see so many Tesla's. You'd be hard pressed to find another brand that is as highly represented as Tesla is. But speaking of another brand that is very highly represented everywhere, and that is Toyota, its CEO, Akio Toyota, has stepped down to be replaced by the person who had been heading up Lexus. What does this mean for the company and its shares if you can discern? Tyler, I woke up this morning and I saw that Ackio was stepping down. It was a very big surprise. I think it was a lot of surprise from many externally.

Akeo is 66, though, and he was working with the chairman who is in his mid-70s, and it was kind of decided that it was time. And Accio and Toyota have been facing more criticism this year because of electric vehicles than last year and the success of Tesla, and Toyota kind of being not investing in these as rapidly as others. And this is going to be an interesting transition. Accio still will be chairman.

His name is on the company. He's a namesake. His grandfather started the company. But it should be interesting to see what the new CEO does, who was leading a lot of their electrification efforts with Lexis, how much they change the plan, or if they even accelerate that EV plan or what they do. They have really been pushing for hybrids, hybrids to hybrids. Yeah, no, they've been pushing hybrids and plug-in hybrids on their Toyota brand.

If I had to judge just as an amateur observer, it would be that Lexus is ahead of Toyota in terms of EVs. I mean, they have more product or a more prominent product, I would say, in that space. You know, I wouldn't even go that Lexus is just such a small brand at this point, but by 203rd, they do want to make Lexus completely all electric. And that's why the decision for the new CEO internally, everyone has told me that it makes sense. It was kind of a natural progression at this point. But the EV plans are still in flux and trying to kind of shore up that and get investors on board. Because when you look at Toyota, it is truly a global automaker. Switching a life switch and turning to all EV is not going to work for that.

because you have geographic reasons that aren't ready for that. So we're just going to keep seeing this transition, and it's going to be very interesting to see what the new CEO does. All right. Michael, thank you. Always good to see you. Michael Wayland. Appreciate it. Thank you. And coming up, we will tackle a trio of tech topics with our panel,

including IBM, adding to the parade of layoffs we've been seeing in technology, plus Chevron facing backlash from the White House over its $75 billion share buyback plan. Power lunch will return in just a moment. Welcome back to Power Lunch, everybody. Stocks trading higher today on a strong GDP report, giving investors hope for a soft economic landing. But our next guest is preparing for a year of more volatility. Let's bring in Mike Binger, gradient investments president. Mike, welcome. Good to have you with us. Thank you. Are you more sanguine about the markets than negative? I assume you are. I am. I tend to be more optimistic this year. I think the market is getting more. and more comfortable that just as you said, we're going to have a soft landing. The economy will be okay that we're not going to go to a lot higher unemployment rates. And, you know, we already have a strong workforce that's earned, you know, their wages are going up and they're spending money.

So I think the market's comfortable that the economy would be okay and earnings will not have to be cut as much as people think in 2023. It feels to my uneducated perspective that the market it seems to want to go higher, whether that is true or not is to be debated, and whether that turns out to be smarter not is certainly in doubt. It may be exactly the wrong thing, but it does feel to me that since midfall, or maybe even early fall, the market has been in a more positive frame of mind. Yeah, I think it definitely is, and you're really seeing that right now. I think investors are seeing and feeling that inflation has peaked. I think they feel in their hearts that interest rates are not going to skyrocket out of control. I think they feel that the Fed is going to do

a couple of moderate raises and then pause and see how things are going. So all in all, I think the market is really becoming comfortable that this will be more of a soft landing than some type of recession that's going to take us over a clip. If you, Mike, were of the opinion that it might be worse. What should you do? Well, if you feel it's worse and if you're going to invest in stocks, then I would invest in stocks that are high quality that were probably beaten up pretty hard in 2022. And I would look for earnings and dividend and cash flow. I mean, it really is just basic investing 101 blocking and tackling. Get back to that high quality name selection. Sure. And I mean, I see names in here like alphabet. I mean, you'd hope they have a fortress balance sheet, so

be Google, even Delta in terms of the airlines. What's your reaction to the Chevron news today? I'm curious. I mean, do you like the idea of returning a lot of this excess cash via buybacks and dividends? Would it make you want to invest in that company if you're not exposed in the energy space already? Yeah, we are invested in Chevron. And when I see news like that with this huge buyback, I mean, think back, you know, a couple years ago. The market was very upset with energy companies because they were just, you know, borrowing and spending and borrowing and spending during the, you know, the fracking era, you know, when that was all coming out. And now that they're returning cash to shareholders, I mean, it seems like some people are upset about that. We certainly

are not. Their cash flow is very strong right now. And, you know, I like the fact that they're returning cash to us. Also, one of your picks is in the beaten up reet space, extra space storage. I assume this is being driven by the need to find places for classified documents. I love your thought there. No, that's not our thesis there a little bit. But when you look at extra space storage, I mean, they're just a pretty mundane business, but it's defensive, it's durable. The stock has gotten beaten up, as all REITs did in 22 when rates were going up. You know, I'm of the belief that the rate increases are going to be on pause for right now. So, I mean, I think this is just a good blocking and tackling defensive type of play because earnings growth

has still been positive, and it's a lot cheaper than it was a year ago. So you don't think rates will go higher from here? You don't think the Fed will raise them another at least quarter point, maybe a couple of quarter points? Oh, no, I think the Fed is going to raise a couple of times, but I think market interest rates are not going to get out of control. And I think we've already seen in the 10-year treasury. I think we've seen the high there in that 10-year treasury yield. All right, sir. Thank you very much. Mike Binger. Appreciate it. You're welcome. Gradient. And buybacks are in the spotlight. The Whitehouse is targeting Chevron for spending that extra cash on buybacks instead of what they say could be

putting the money towards more drilling. We'll be right back with more on Power Lunch. Welcome back to Power Lunch. It's going to quick check on the markets where the NASDAQ is now up 1.3% as the rise continues. The Dow is up about 106. Tech is outperforming today as you might have gleaned and that's helping us with a little bit of this dispersion. The Dow also weighed down by IBM after its earnings last night. Let's get to check on the bond markets, too. There's the man of the hour. Rick Santelli, live at the CBO.

Rick? Hi, Kelly, yes. You know, maybe we glean a lot from a two-day chart of tens because we broke the pattern we've had all week. Instead of trading below previous days low yields, today we're trading above yesterday's yield. We did have very low initial and continuing claims, and tomorrow's the big number.

We're going to get a lot of information, some of the Fed's favorite inflation gauge activity. And if you look at the close going back to the 18th, that sub 340 closed, that was a three and a half month low yield close. We've come back a bit. And even though many believe rates are going to keep going down for tomorrow, look at the bigger chart. What you want to pay attention to is 340 to 355. Those were breakouts on either side that you have to pay attention to, especially knowing that we have Fed and jobs next week. And we'll probably grab a trader here.

Let's see what they're looking at. Yes, sir. Tomorrow, we have some of the big numbers. We have personal consumption expenditure. We have the deflators. Is there any activity going on in options that give me any clue as to what traders are thinking for tomorrow's number? Well, the VIX is down a little bit right now, but that doesn't mean all options are down. It's the front end. People want the gamma. There's a lot of risk reward with owning a lot of the gamma. And so they're expecting something tomorrow, maybe something next week. But they're afraid that there might be a move up or down. So they just want to pay. So they're more concerned about nearby.

They're not financing the big option plays over the longer term. Correct, correct. They want that instant gratification. Or they're either nervous or they think that something's going to happen. Now, when we look at some of the options that expire in one day, that really accounts for a good chunk of the volume these days. That's a very big amount of oil. Tomorrow, right after the number comes in, do you think they're going to really hit volatility hard?

Oh, that's tough because you think maybe possibly, but there's also unemployment next week. So unemployment next Friday, there's a couple other numbers next week. don't want to hit it too hard because stuff's going to get, they want the protection. So basically they want versatility. They want to be able to be flexible, but they think there's a big move coming. Correct. David, thank you. Kelly and the gang. Back to you. All right, Rick, I'll pick it up. Thank you very much. Rick Santella in Chicago for us. Energy, the best performing sector today helped by a nice gain in the price of oil, not to mention the price of Chevron stock, Pippa. Yeah, exactly. Chevron up more than 4%. And leading the

energy sector higher, a lot of momentum behind that big $75 billion buyback announcement, but then oil is also up more than 1%. And UBS said today that they see Brent topping $100 in the coming months, but there is so much now hinging on this bounce back in Chinese demand. So you got to wonder what happens if we don't actually get as healthy of a forecast in terms of their demand rebound as the street now seems to think we're going to get. And of course, on the flip side of what happens if it far exceeds what Wall Street is forecasting. And then we've been watching that gas all week now below the $3 level and falling to the lowest since April of 2021. Just a brutal end to this contract expiration.

It does roll tomorrow. But I should note that the next contract for March delivery is also under $3. So it's not like this is a total anomaly on the under $3 level. I was wondering when, because I think it was last night that I said. And I'm going, I wonder if this is what Pippa was saying about the contract is coming up and no one wants it because no one can store natural gas unless you're a tanker with an LNG facility. Yeah, so part of that, but it's just the end of the curve has come down as well. So there are those short-term forecasts for those higher temperatures that are influencing the price action right now. So what happens when the contract rolls over?

It's at 2.94, 294 per whatever, million BTUs or cubic feet. What happens then tomorrow? Well, tomorrow, the March contract, which is already trading, is already the more actively traded contract, just becomes the front month one. Because the front one. So that's the one we'll be looking at beginning tomorrow. Well, tomorrow we'll still see the February 1 because tomorrow is the last day. And then on Monday, we'll see the March 1. But we can show the March 1 tomorrow as well.

I'll be sure to have that one. And to your point, there's not a lot of difference. People aren't just saying, you know, it's the end of the contract. It's still a little quirky. It's like they used to call it or maybe still call it the Widowmaker. I mean, Nagas used to be the trade that everyone just would keep crushing you. And then we thought we saw things change in the last couple of years with all these energy shortages. And it's amazing to see it come all the way back.

And you just have to think it can't get any lower. I know I'm saying that, but like, you just have to think it can't get any lower than where we are now. Yeah, I mean, I thought that a month ago, and here we are. And I think that this has taken a lot of people by surprise. And I just think the extent to which we were forecasting colder temperatures, and in Europe as well, I mean, there was just so many fears around what is Europe going to do. And then with high temperatures, that quickly changed. But, you know, when you're relying on the weather, who knows what happens next. That's exactly right.

and storage levels are rising. Everything's fine. Pippa thanks for now, Pippa Stevens. Let's get to Contessa Brewer now for a CNBC news update. Contessa. Hi there, Kelly. Here's what's happening right now. Five former Memphis police officers have been charged with second-degree murder and other felonies in the arrest and death of Tyree Nichols. Court records show all five are in custody. County prosecutors are expected to give more details on the case. And when video of the arrest may be released, tell us that at a news conference set to start in about half an hour. National Archives reportedly is asking former presidents and vice presidents to make sure they don't have any classified documents in their possession. Those requests come in the wake of recent discoveries of documents at the homes of former Vice President Mike Pence and President Biden and, of course, those of Donald Trump.

And a White House proposal will allow people to check Hispanic or Latino as their race on federal questionnaires. This is the first update of federal definitions of race and ethnicity in more than 25 years. And people from the Middle East and North Africa would also get their own category instead of being more generally categorized as white. So this could give us a lot of new details when we look at census results, Tyler. All right, Contessa Brewer, thank you. Ahead on Power Lunch, more tech layoffs to tell you about. Smartphone shipments are shrinking. And Trump, signing back on Facebook, we will break down those tech headlines next.

Welcome back to Power Lunch, everybody. It's time for some tech talk. with lots of headlines to digest today. Smart phone shipments, wait till you hear the numbers, falling to their lowest level in a decade. IBM, meanwhile, joining the list of tech giants announcing layoffs that's weighing on the Dow today, even though they're cutting nearly 4,000 employees,

and meta, reinstating former President Donald Trump on Facebook and Instagram after a two-year suspension. We brought in the heavy hitters, the tech team. We're not going to make any bachelor jokes, we promise. Here to help us make sense of it all in our studio, John Ford, Dominic Chu, and Steve Kovac. Welcome to all of you. All right, let's start with the smartphone data

because just over $1.2 billion shipped last year, sounds like a lot. That's according to IDC. It's actually the lowest since 2013. IDC saying there was significantly dampened consumer demand, inflation, economic uncertainties. But John, this is like, it's one thing to say, okay, we're coming off the pandemic.

There was, I guess, a surplus. But we've pulled way back now. Wow. First of all, I am not the father. Yes, we have. So there's a demand issue here. These are shipments, not sales, right? So there's inventory buildup that's an issue in there as well. And it's Apple, but it's also other smartphone makers who fared even worse during this period. And so the implications for 2023, like once we get past the holiday quarter, how long does it take you to work through excess inventory? Does consumer

spending pick up again, especially given the fact that the savings rate is coming down, credit card balances are high and Jamie Diamond says the consumer might tap out. Are the phones getting better enough, fast enough to induce people to change? That's not really the issue here, Tyler. The biggest culprit in my view is Apple because those production snags that we saw last fall that caused all those missed production in China, caused all those missed sales. This is one week from today, we get Apple earnings. The number one question I read in all the analyst notes leading up to that is, is the

demand going to carry into this quarter because they literally couldn't make the phones in time for Christmas. So if this was a supply issue, not a demand issue, then actually that's bullish. But on the Apple end, but the demand is falling on the lower end, the Samsung's and those Android devices. That's where you're saying the demand fall. So then I come back to the question. I mean, if it's not, if it's not an Apple specific issue, though, there are clearly specific issues pertaining to Apple, is it not true that people are holding back and holding on the phones longer because the improvements in the phones aren't as great as they were five, ten years. It's not necessarily about the improvements. Apple's actually had a pretty good cycle with the 1413.

Part of it is also the carrier subsidies. What incentive do the carriers have to really discount a phone when people aren't buying that much, right? If the economy is slowing overall and they're not leaning into, say, 5G deployment right now, do they really need for that phone to be the salesman for the network the way they did a couple of years ago? So if they pull back on subsidies and consumer demand is waning a bit, all of that affects whether the consumer feels like it's time to buy. The bigger picture here is amidst all of the supply chain issues and everything else, there is still that macro economic backdrop where consumers might just feel a little bit more cautious about spending. I mean, a smartphone these days costs anywhere from $300 to over $1,000 for the high-end Apple ones. If you have an environment where you're paying $7 a dozen for eggs, you've got a food cost soaring, you've got a lot of people feeling like their paychecks are not catching up, it might just weigh a little bit on consumer sentiment.

And you get a feeling like if those things, and by the way, the news cycle doesn't help. Because every day, how many CEOs come on our air talking about the word recession, recession, recession, recession. At some point, it's got to be like, okay, maybe I should be a little bit more careful. Not to mention of the layoff news. That scares people. Well, speaking of layoffs, IBM is set to layoff about 1.5% of its workforce, about 3,900 folks. There you see the stock down 4% today or $5. It's, of course, joining a growing list of tech giants who are doing this.

So the issue right now is it's almost like a self-fulfilling prophecy for technology or media and telecom in general. You had some of the biggest players early on set the precedent. And what that's in essence done is given many of these tech firms who arguably, yes, it's given them absolutely. Starting with Elon Musk and Twitter. Right. So this is the idea that this is, I mean, to kitchen sink it is to be a little bit crass, a little bit simplistic about it. But this is a quarter where you could see a lot of tech CEOs coming out and announcing these types of cuts that are not massive in nature and scale, but enough to at least kind of right size their cost structure.

And they won't fight, they won't face the kind of blowback that they would normally see in a normal cycle because every one of their peers is doing the exact same thing. What's noteworthy here, John, is that their stock is down. Some of these tech companies have come out with job cuts, and the stock responds positively because investors go, you overhired, we have to pull back, we have to right size. Why in IBM's case, I mean, are the layoffs telling something perhaps the market didn't sense about slowing demand or competition? How to put this kind of politely in the sense that any layoff is significant, certainly for the people who are affected? And you hate to see that happen. For IBM, this is a really small rounding error. It's almost something

that you wouldn't even announce in a different economic time as IBM churns through its workforce. I think the reason why the stock is down today doesn't have to do with the layoff, unless some investors maybe feel like it wasn't big enough. It has to do with what some analysts would call earnings quality, the fact that the software number wasn't as much up as it might have hoped and plus IBM's helped by a stronger mainframe cycle right now. So that helps on the hardware side, but that doesn't necessarily stick around for quarter after quarter after quarter. So I think IBM's had a pretty good run.

It was actually up last year where others were not. And so, you know, in this environment, maybe the revenue was pretty good, right? Right. But there were also cash flow concerns. There are some issues with regard to how the cash flows are shaping up and the growth of those cash flows in the future that have at least some analysts and investors taking some pause with regard to IBM's results.

Well, and IBM also, Steve, this was a stock, finally everybody was excited about. To John's point, we're coming off the performance last year, and it's like, wow, this is when they're bucking the trend, they're turning things around. Now it seems like we're calling that a little bit into question. Yeah, last year, as Big Tech got wrecked, IBM, of all names, was the one that outperformed the rest of their peers.

And look, we see the stock down today because of this, but to John's... Don't call it too, so. Look, how much Tesla is up. If Tesla is up, of course, IBM's down. Right, right. Is Tesla going to stay up? Is IBM going to stay up? And Tesla's up 10% because it's up.

I mean, listen, some investors will look at that 12-month chart and say dead money is a good thing on a relative basis compared to where everything else has been in tech. All right, let's move along then and talk about what's going on over at Meta, where like Twitter did previously, they're reinstating the accounts of former President Donald Trump on Facebook and Instagram. He was suspended for just over two years after some controversial posts around January 6th insurrection. And I guess the question here, there's a couple of this process question. how do they deal with this in the future. There's also, Dom, the question of, in Twitter's case, I believe, am I wrong, that he was invited back on or his account was reinstated,

but he has yet to come on and actually tweet. I mean, there's an interesting dynamic in that the backlash among getting kind of kicked off these platforms, kicked off this whole campaign of trying to find alternative platforms and marketing those alternative platforms. You think about truth social, you think about parlor. Yeah, exactly. I mean, all of these things are in place.

So what's curious about this is about whether or not even though the account is able to be reinstated, whether they're active on it. Because if they are, they're acknowledging the fact that they wouldn't have had the influence that they did without the platforms themselves, which I think is just strange for somebody who really feels as though they're the ones who are contributing the content to those platforms. What does this say, John or Steve, about the place that tech companies see themselves as, quote, arbiters of or publishers of political discourse. Nick Clegg, the spokesperson, or I don't know what his job is it, who made the announcement here, talked about Facebook not wanting to be put in the position of arbitrating political discourse. They've been saying that for years. We've been hearing this

since the 2016 election, and I've had, I'm sure John, you have two, countless discussions with executives at Google and Facebook about this. And they'd say, exactly that can't be the arbiters of the truth, but they don't understand that they're also media companies. And just like we make editorial decisions right here at CNBC and we have process. I actually see it that way also. I see them as publishers. Exactly, exactly. But they don't see themselves that way. And that's where the issue is. And like, for example, you look at when Elon Musk took over Twitter and his behavior just kind of arbitrarily banning people proved that, look, I'm an editor. I'm deciding who gets to pick and choose. And that's what people

complained about Twitter in the first part. So these are all editorial decisions. And the law, Section 230 as it stands, allows all of these platforms to make their own rules. Remember, rivalry, the nittings, they are allowed to do whatever they want. The more they try to act like the arbiters, the more we're going to hold them to a different standard, and maybe change that

law. Here's the business part of the story. I think that investors should pay attention to. The narrative on Facebook has totally changed at this point. Remember when everybody's, oh, it's crazy over there. They don't know what they're doing. That's what they're saying about Twitter now. At Facebook, Facebook has this oversight board that said Facebook, you need to figure out what the rules are for kicking people off and bringing them back on.

It can't be indefinite. Facebook has gone back. They've done that. Two years. They've made a plan. They've got a post out. And now they're doing it. And so all of a sudden it looks like, okay, well, not only does Facebook have process when it comes to this sort of thing, their core business, a lot of analysts are turning around saying it's going to be up this year.

And the question is, is Facebook going to keep spending on the metaverse? But if they don't, all of a sudden that core business that was getting all of that criticism, now the heat's on TikTok, right? The heat's on Twitter. Absolutely. And it's off of Facebook. If they said they took your point and said, you know what, forget the metaverse. We're changing the ticker back.

This shares are probably double. Or just spend $8 or $10 billion instead of $20. Who knows? And put up guardrails on everything. Right, right, exactly. Or spend it on lithium in minds. All right. John Ford, Dom, too.

Steve, thank you very much. Enjoyed it. The White House blasting Chevron's buyback announcement. We'll have the latest on that next. All right, let's give you a quick market check with the Dow industry is up about a half percent, double that, twice that or a 0.8 percent for the S&P 500, back above 4,000, pressing upward toward 4,100. NASDAQ doing what it's been doing, and that is moving higher in, I guess, leaps or bounds, or both, I suppose, and Tesla helping there up almost 10 percent, 9 and a quarter percent. still down nearly 60% off its one year high, but it is up markedly.

I've read the number earlier today. I don't want to quote it because it's not in my head, but it's high double-digit number. Off the lows, more than 50% just in a couple of weeks' time. Crazy. Still to come, President Biden commenting on the economy and jobs after the White House had some harsh words for Chevron's huge buyback plan. We'll wrap any key headlines. Stay with us. All right, welcome back everybody.

Chevron pledging $75 billion for share. buybacks as cash grows, investors may be happy, but the White House isn't blasting the company for not reinvesting the money towards more drilling and production. Kayla Taushy and Bob Bazani here to discuss. Kayla, let's start with what the White House said in response to this news of a big buyback. Well, Tyler, President Biden is speaking nearby in Virginia, talking up the improving economy, according to the White House. And the president's set to announce what he's going to call the Invest in America cabinet. Six of his top six. secretaries that will be dispatched across the country in the coming months to talk about how good

the economy is and how it's essentially bucked a lot of analysts' expectations recently. They're going to be contrasting with the Biden administration is doing to what Republicans on Capitol Hill have proposed in some of the actions that they're taken to drive sales tax higher or make gas prices more expensive. But on that last point, there's some low-hanging fruit that the administration is taking amen. And that is Chevron's announcement of a 75-5. billion dollar stock buyback and an increased dividend. The administration has been critical of buybacks for the better part of two years, both in public and in private meetings with the CEOs, according to people who are familiar with these meetings. But overnight, a White House official

releasing this statement directly in response to what the company announced, saying that essentially the company needed to be plugging that capital back into more drilling or returning some of that money to consumers, not shareholders, saying for a company that claimed not too long ago that it was working hard to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it. I talked to some industry sources about how this statement is being received and they said it's expected and that it won't necessarily change the company's plans, but that Chevron, like many companies, is having issues ramping up production, hiring employees, getting the parts it needs to build more rigs.

And so even if it could or was interested in increasing production, it might have a hard time doing so. Kelly? Yeah, true. And Bob, the statement, Kayla Redd said that wealthy, talked about wealthy shareholders benefiting from this, but Chevron's a widely held stock, one of the most widely held. I have people emailing me saying, hey, tell them, I'm not wealthy. I own Chevron, and I want them to pursue these moves. Everybody owns Chevron.

It is one of the most widely held stocks. It's interesting that Berkshire actually is the biggest holder, because Warren Buffett took a huge position early in 2022, which turned out to be a very good move. They essentially quadruped with their holdings. But other than that, you're right. It's the usual Troika, Vanguard, State Street and BlackRock. Why then? Well, they own the ETFs that own the index funds like the S&P 500 or the S&P Energy Index.

And those are the most widely held indexes and ETFs that are out there. That's why America owns so much. The one thing that's really important here to understand is this is bigger than Chevron. Buybacks are a really, really big business. right now. They almost bought back $1 trillion last year in the S&P 500 total buybacks. That's big. That's bigger than dividends, which were about $560, $580 billion. And the reason that it's such a big business here is that Wall Street just loves buybacks. It loves them because there's immediate gratification. You think about it, the company's going out and buying shares right in the public

market. Everybody sees it and everybody likes that. And it can be adjusted a lot lower if the cash flow declines. Dividends are stickier. So Wall Street likes it because it's It's flexible. That's the key thing for it. I'll tell you the big problem that it's always existed. We've talked about this for years, Kelly. They often don't lead to any lower share count. You're supposed to lower your share count to improve your earnings per share, but it doesn't happen

because many companies simply add more options to employees to their executives. And there's a lot of M&A activity. Chevron itself, same thing. They haven't reduced their share count in five years, but they spent an awful lot of money buying back shares recently. They just added on the other end. And guys, back from here. All right, Bob.

Thank you very much. Bob Pisani. Kayla Taushy, thank you. More power lunch is next. Everybody, stay with us. Don't go anywhere. Welcome back. A few weeks ago, we talked about Microsoft's big investment in AI.

We use chat GPT. Remember to write the introduction to our guest interview? Well, BuzzFeed is now reportedly using it to do the same thing to generate content to personalize stories, write quizzes tailored to each reader. A BuzzFeed spokesperson says the company remains focused on journalism written by humans. But Tyler, the most insulting, part of all of this is the, what is you called? And you're tripling of the shares on this move today. It's a teeny tiny stock now, but it's getting a second shot here. A BuzzFeed. Look at that.

Up 140%. To me, it's kind of reminds me of the debate over genetically modified foods. And these are genetically modified pieces of copy and reports. They're ungenetic or something. They're ungenetic. Yeah. By the way, should we also do a quick check on bed bath? I think those shares were halted as well. So this is quite a time. If you're a small stock with a lot. at stake here. Buzzfeed trying to pursue one option bed bath for what it's worth, having some volatility of its own. You can see the shares down about 17% of the last trade. Down at $2.67. All right, folks, that'll do it for power lunch. Thanks for watching.