Power Lunch - Wall St. layoffs, nat gas prices plunge and a 10% rally this summer 6/27/22

Episode Date: June 27, 2022

A two-year hiring boom on Wall St. could turn into a bust. CNBC.com’s Hugh Son reports that broad based job cuts loom at the major banks for the first time since 2019. Plus, the EQT CEO on why nat gas prices have plummeted 25% this month. And a veteran strategist says the stock market is ready to rally 10% this summer. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Contessa Brewer. We're in today for Tyler Matheson. Here's what's ahead. Wall Street layoffs. A two-year hiring boom is coming to an end. The deals are slowing. IPOs are drying up. And according to a new CNBC.com report, the math is ominous. Plus, the plunge in Nat Gas. Price is on track for their worst month since late 2018. The CEO of the largest U.S. Nat Gas producer on where they go next and what the G7 meeting means for energy security. Kelly. All right, Contesa, thanks and welcome. Hi, everybody. Market tipping back towards the downside again, its stocks are trying to keep this winning street going. Session load down was down 116. We're just shy of that right now. About a third percent declines for the two major averages. The NASDAQ

down three quarters of 1%. Now, energy is the best performing sector today, with Valero and Devin up about 7 percent, marathon up about four. On the other end of the spectrum, the cruise stocks are some of the worst performers. Royal, Norwegian, Carnival, all shedding about 3 percent today. Kelly, thanks. And though the Dow remains 15% off of its year high and the NASDAQ more than 28% off, the major averages are coming off a sharp bounce. The Dow is up about 6% since its intraday, June 17th low. The S&P has gained nearly 8% and the NASDAQ is up 10% since its June 16th intraday low. Well, now to the market, it's got more to prove than this is just a fleeting snapback. And our next guest says he expects a 10% rate. this summer led mostly by the tech sector. Barry Bannister, the chief equity strategist at Stiefel. Barry, good to see you. On what are you basing your prediction? There was a strong element of sell the rumor of a slowdown by the fact. sentiment was very washed out. We wrote a report last week calling for this 10% bounce to 4150 on the S&P. I could actually see something

closer to the mid-4,000 range. That would be close to. $14,000 NASDAQ. It would all be price earnings ratio. It's not going to be earnings. We're about 4% below the street for this year's earnings estimate. So it's a sentiment bounce back as people feel like peak fed, peak tightening in the 36-month rate futures was already priced into the real yields of the treasuries. And that's what compresses the price earnings ratio, is those real yields. And they look like they topped out. All right. So if you're looking at valuation and not earnings here. What's your prediction for what happens to, say, gross domestic product? What are we going to see from the manufacturers? You know, it's interesting. We look at cyclicals relative to

defensives. And so you break the S&P into what's called the global industry classification standard, Morgan Stanley Capital International, 24 industries. And you clearly know what's cyclical, right? It's going to be energy, materials, industrials, financials, and what's defensive. And that's going to be your staples, health care, utilities, telephones, and so forth. So rather than GDP, we look at industrial production. Industrial production has to go negative. The PMI index has to break below 50. Spreads have to widen.

That's when you have a real leadership by defensives over cyclicals. We didn't think any of those breaks would occur, and so therefore we saw the cyclicals bouncing back. Not just cyclical value there. a little bit of a move there, but tech has become value in some cases, and a lot of it is cyclical. So we saw a bounce back for cyclical relative to defensive. Barry, in a way, you know, we just had a 6% week. So a 10% summer, while exciting and a nice break from what we've been through, could we do that in a very short period of time, actually?

Kind of spin this narrative ahead a little bit. And after people regain a little bit of confidence in the macro landscape, what happens next? Yeah, I just said. I mean, we could go to a mid-4,000s and push 14,000 on NASDAQ. I'm leaving a little bit of dry powder because I have to watch the data. You know, we have short-covering, we have rebalancing of funds this week. Those are very positive, and other brokers have talked about it very recently. But we know what to watch. We're watching the Purchasing Manager Index for Manufacturing, the Goldman Sachs Financial Conditions Index, the policy of foreign central banks, which will determine whether the dollar is too strong, and that's very bad for global liquidity, let me tell you. And that's a very bad thing for the market, for the dollar to burst higher. We're watching oil and geopolitics. It's all one big trade. And credit, as I didn't mention them, but credit, corporate credit, is also very important. So it's all one big trade. Are you in cyclicals or are you in defensives? And right now we had been in defensives for six months. We are now back to cyclical.

And do you think at this point, I mean, the big question on retail investors' minds, the question that most of our guests are getting asked on a regular basis, Barry, is it a slowdown or is it a recession? Well, I mean, the reason we're not up today is because the pending home sales, which is, you know, pending with a contract, not yet closed, that was good. The data was strong. And the durable goods number was actually very strong. So it's not weak enough to stop the Fed, and that's what the market wants. They want a slowdown. They just don't want a recession.

And so we'll be, as I say, watching data on a minute-by-minute basis, feeding it into our models. But right now, the economy is holding on. It does not look like a recession in the next six months. One thing to keep in mind, we've got data back 100 years on this. The market's horizon is to look out six months. They don't think about recessions in late 20-23. They're only concerned with the next six months. Do you see a classical recession in the next six months?

We don't. All right, Barry Bannister. We appreciate your insight and your perspective. You have a lot of wins to chalk up, a lot of correct predictions here. I'm looking back. Pretty good. Let's see if you're right after the summer. Okay.

He's like, bring it on. All right, a big test for the market could come this week when key economic and earnings reports are released. Joining us with her look ahead is Stephanie Link, the chief investment strategist and portfolio manager at Hightower and a CNBC contributor. Stephanie, welcome. Before I fully dive in, are you as feeling as optimistic as Barry? Well, I mean, we are down quite a bit. I want to get through earnings, actually, first, because I think that's the next shoe that could drop, but I think we're pricing in a lot of bad news.

So that's a really important time, and it starts in the middle of July. So unfortunately, between now and the middle of July, we're kind of hostage, to the macro, which is what we talk about every time I'm on the show, what to look ahead. And the big, big number to look ahead this week is the core PCE deflator. It's supposed to be up four tenths of a percent month over month, 4.8 percent year over year. We know the Fed looks at this very closely, and they want it closer to 2 percent. So there's a lot of work and a lot of heavy lifting that the Fed still has to do. And I agree with Barry.

I mean, the data today was actually pretty good. So they're probably not going to stop. It's 75 basis points as expected in July, possibly again, in September. So what does the market want, Stephanie, when we get the PCE report, when we get final GDP, is strong data bullish or bearish right now? I always root for strong data. I mean, that's just in my nature, right? That's in your nature, too.

I know you. But clearly we want to see some sort of a deceleration. I mean, I think people are getting a little carried away with this peak inflation. Okay, we've already seen peak inflation and we're going right back down. just don't think it's that easy. I think it's going to be a process. It's going to take time. That is why we've seen multiples contract this year. And that's why I mentioned earnings I've actually held up this year. They're expected to be up 10%. But I do think that's going to get ratcheted down. And we're just trying to go through that process of a little bit lower earnings,

not a disaster, a little bit lower earnings, but we have to watch the inflation data. Okay, well, so if you're watching earnings, and I've got the list of stocks that you're really paying close attention to today, Stephanie Nike, number one, What are you looking for from Nike? Yeah. So the big question is going to be, how bad is China? We know China is going to be awful because VF Corp and Adidas told us that. They both of them had sales down 35%.

But I still like the casualization total addressable market story for Nike. I like what they're doing in terms of DTC and the transition there. It's very helpful for margins. They've got pricing power. They've got cost controls put in place. So I think margin should stay firm. And they have easy comparisons. So I bought it, I added this back into my portfolio a couple of weeks ago, very small position.

It wasn't for the quarter per se. It's just quality on sale. That's my definition of this company. That's the case with Nike. What about with General Mills? General Mills has been remarkably strong this year relative to the group up 5% and the group is down almost 3%. And it gets you a 3% yield. And then you kind of dig into the numbers.

The key is going to be organic growth, right? Organic sales, 8.9% is expected. but it's going to be led by pet. We know pets are strong from Zoetas and Alonco, right? So that pet sales are expected to be up 15 and a half percent. Blue Buffalo could be up 20 percent. And food service up 19 percent. So the top line is going to be good.

It's going to be margins and pricing versus inflation. That's going to be interesting to watch. Price mix is expected to be nearly 12 percent. That's huge. Wow. So this one is going to be an interesting one to follow, but I do like it for the long term. All right. So Nike, General Mills, and Mike, to round things out.

What are you looking for there? Because semis have been a really interesting, interesting. Tough space. What do you see in the tea leaves? It's been a very tough sector. I do not own any semiconductors. I sold out of everything two months ago. I would love to look for, get an opportunity.

This stock is down 37% trading at six times. Problem is we know PCs and smartphones have decelerated from last quarter. On the flip side, NAND pricing has been very strong. So NAN pricing up 20%, DRAM pricing down 10. what's going to win out. It's going to be an interesting call. But I'm looking more for color and double ordering, triple ordering, that kind of thing. I don't think it comes this quarter, but I think it's on the horizon. So you wouldn't necessarily, you don't think, turn into a buyer here after one report from my crime, but, you know, looking for signs of maybe how much of the

adjustment is behind us. Absolutely. Positively. I would look at Broadcom. I like what they're doing. I mean, 49% of his sales now are software. So it's not really a, it's not even a pure play semiconductor anymore and the stock is very attractive with a good dividend yield. So that would be one on my radar. All right. Stephanie, as always, thank you very much. We appreciate it. Thanks, Cal. Coming up, Wall Street's hiring boom may soon turn into a bus. CNBC.com's Houston broke the story and says when revenues declined, as it has for some of the big banks, there is only one way to respond. Plus, Chewy off 35% this year. Bedbath and Beyond off 55%. Etsy, down more than 60%. We'll trade today's three big calls on three consumer-related names and our three-stock lunch.

Welcome back to Power Lunch. Huge layoffs could be coming at Wall Street banks. Hugh Sun, CBC.com's banking reporter has that story. And really, Hugh, I thought all these banks were going out trying to hire anyone they could get to walk in the door or even log on remotely. What's changed? Yeah, hey, contestant. That's actually very accurate. That was a story as of just earlier this year in, and, you know, last year. So let's set the scene a little bit. You know, 2020 happens, obviously, the pandemic. The reaction to that is to at least trillions of dollars, you know, through the Federal Reserve and take interest rates down to zero. And what did that do? That set off a deluge of IPOs, a deluge of deals, M&A deals, and banks appropriately staffed up. So if you look at the numbers, Contessa, so JPMorgan, which is one of the biggest Wall Street firms out there,

added something like 13 percent to their headcount. Goldman Sachs even more. closer to 17%. Just for those two firms together, you're looking at about 15,000 more bodies, you know, the Wall Street operations than they were two years ago. So that's the scene we have. And, you know, what's happened this year is interest rates are higher. You know, you've had parts of the capital markets business completely either be very chilly or shut down completely. And you've had a complete, you know, drop off in the level of revenue that they get from IPOs. And if you look at the deal logic data, it is staggering. There's a 91% drop in US IPOs. If you look at high yield, you know, riskier parts of the debt issuance, that's down something like 75%.

M&A is down 30%. So there's no part of the investment banking franchise that has been untouched by this revenue squeeze. Hugh, 15,000 people, and that was just that the first two firms mentioned Morgan Stanley proportionally hired even more. Was it too much? I mean, was it, did they just think these trends were going to last forever? Yeah, you know, this gets back to the nature of Wall Street, which is that it's a book. It's a feast or famine business. And when it's raining, you have to obviously, you know, try to collect as much of that revenue as possible. And, you know, look, the people who run Wall Street know the history, they know very well. They know it's very pro-cyclical.

And they still can't do anything to, you know, to cushion that. Because when the deals are coming, you have to have your people. You have to have your boots on the ground. And as a matter of fact, I mean, we're talking about, you know, we led with huge layoffs. I mean, I tend to think they're going to be more selective. you know, the people I'm talking to you are really talking about more of the framework of 5 to 10%. So, you know, these are, you know, Wall Street jargon's rift reduction in force. And, you know, they still want, you know, bodies, they still want, you know, people in their seats at the start of 2023 because you don't know if the capital market's going to open up.

You don't know if that, you know, that the dam breaks in terms of issuance that's in the pipeline that's been pushed out actually gets to start to happen. So, you know, it's going to be selective, but it will be, you know, broad basis. from what I'm hearing. I don't know if it happens this summer, which would be very unusual, by the way, or if it happens later in the year in the October-November timeframe, but, you know, the math is very clear there have to be cuts. What are you hearing about the how they're factoring in the moves that the Fed is making? Well, so the Fed has, you know, a series of impacts on the trading operation. So as interest rates increase, what's that doing to your risk-weighted assets if you're a Goldman Sachs or JP Morgan? You might want to have less in risk-weighted assets

in a trading capital essentially for these risky activities and bring that down. And so certainly, you know, traders hate that because then they could make less money. You know, their P&L goes down. But certainly what you would say is in an rising interest rate environment, a lot of these businesses are going to be, you know, are going to make less money. And therefore, there's going to be less of a bonus pool to spread around to the bodies that they need to. Yeah, that's a great point. Hugh, thank you for bringing us that story. Kelly, the interesting thing here, and you remember this in the lead up in 2008,

2009, 2010, the reaction to the great financial recession in lower Manhattan was, not only did you get a bunch of layoffs at the banks, but then there was this trickle-down effect where it affected real estate value, it affected mom and pop shop. And we're already seeing the mayor of New York City trying to combat this work from home culture because he wants the thriving economy again downtown. Now here's an idea. The more that there's layoffs, the less power employees have. Maybe the more they have to come back to the office and it could be a win-win even as it shrinks. I mean, that's one way to look at it. It'll be interesting to see how this lays out. Presumably it would be last in, first-out kind of thing. And maybe people have not made an investment close to their corporate offices. But it does have a way, I mean, especially lay-of-s of this magnitude of affecting lots of other sectors. Downtown's all residential now anyway. It's all baby strollers. I can tell you firsthand. Coming up, travel tantrums, booking sites seeing huge uptick and complaints over canceled flights, how are travel firms themselves dealing with the chaos? We'll dive into that.

Plus a clean start. We're highlighting one startup looking to reseed damage for us. Those details when power lunch returns. Welcome back, everybody. More than 800. 800 flights canceled yesterday. The fifth straight day, that number topped 500. The travel chaos, obviously a huge problem for the airlines whose stocks remain under pressure. But also, imagine being a booking company right now. Seema Modi spoke with the CEO of that very one earlier today. She joins us now with the details. Seema. And Kelly, this is a high-stakes blame game between the airlines and the FAA.

It's being watched very closely across the broader travel industry. The cancellations and the delays, as you mentioned, they don't just pressure the air carriers. It affects the hotels and the online booking platforms that have to find other solutions for their customers, often having to work directly with the airlines. I asked booking holding CEO Glenn Fogle, who's to blame? Here's what he said. It's the same thing, whether it be a government person who's an air traffic controller or a person who's putting bags into a plane.

Either way, it's a shortage of people trying to get them back into space and get things up and running. It just isn't happening fast enough compared to the amount of demand that's coming back. Fogel shared that demand for travel is very strong, but that visibility into the fourth quarter is limited, as many customers are using a short. shorter booking window. And while past recessions has resulted in a drop in travel, this one is preceded by a global pandemic, which he says could change the appetite for travel this winter.

Now, in a note to investors, BTIG analyst Jake Fuller writing that travel is not immune from the mounting macro pressure and that his channel check show weakening trends for Airbnb, booking and Expedia in the month of June by eight to nine points from May. I would point out the stocks of all three of these online booking operators are trading down double digits this month, Kelly. It's just so unfortunate, Sima. I mean, this was supposed to be the summer of reopening. We see it with the cruise lines as well pulling back today. Same problem there. Whipsaw action in the cruise lines, Kelly, they were the best performing stocks on Friday following carnival's earnings and a pretty good occupancy number that CEO Arnold Donald shared.

He joined us on closing bell where he talked about the pent-up demand for cruising. Today, these stocks are trading down after a note from Stiefel analysts there saying that the pricing offered by Carnival is softer than expected into the second half of this year and that what you're seeing Carnival do is that in order to boost bookings, they're bringing down the price as they get closer to the day of departure. That's not obviously a good sign. And that's why they're lowering their price target to $20, which is still above where Carnival is trading at right now.

Yeah, by the way, you want to talk about infuriating long-time loyal customers who book early and then see their price of the cruise plummet. Exactly. Nothing makes them more angry. Seema, thank you for that. Let's get to Bertha Kuhms now for the CNBC News Update. Hey, Contessa, good afternoon. Here's your CNBC News update at this hour. Ten people are dead and 40 are injured after a Russian missile struck a shopping mall in central Ukraine.

More than a thousand people were said to be inside the mall at the time of the attack. Ukraine's president Zelensky says the target presented no threat to the Russian army and had, quote, no strategic value. A New York City law allowing non-citizens to vote in local elections is being struck down by a judge who said it violates the state's constitution. The judge also argued the law violated sections of the state's election law and municipal home rule law. And with inflation at 40-year highs, workers across all income levels are having a harder time making ends meet. 58% of Americans, roughly 150 million adults, are living paycheck to paycheck, according to a new Lending Club report. Even among those earning $200,000 or more, 30% say they are living paycheck to paycheck.

That's an amazing stat, isn't it? It sure is. Bertha, thank you for that. Ahead on Power Lunch, the natural course of things. Nat gas down 25% this month. We'll speak to the CEO of EQT about this pullback from the highs. Plus, today's three-stock lunch. Trading consumer calls from Wall Street.

Power lunch returns in just a moment. Don't go anywhere. Welcome back, everybody. 90 minutes left in the trading day as the first half of the year is quickly drawing to a close. So let's get caught up across the markets. Stocks, especially after that strong week, bonds, commodities. We also have the CEO of EQT.

We'll get to him in just a moment. Let's kick things off with Bob Bassani. He is down at the New York Stock Exchange. Bob? Kelly, a little rotation going on. Remember, we had a nice rally, particularly. at the end of last week here and things moving around a little bit today. So let's take a look at the Dow movers here. Primarily last week, energy stocks got clobbered, a little bit stronger

today overall. We're also seeing healthcare stocks doing well, United Health doing well, big leader in the Dow. And of course, we saw tech stocks last week doing really well. Well, not so well this week. Microsoft, Addawn. Apple, sort of flattished today, but it's been up five or six percent in the last four or five days. Anything really got a lot of energy? The pharmaceuticals. Merck set a new high. One of the only ones. In fact, there's only three new highs at the New York Stock Exchange, Lilly, Bristol Myers, and Merck. Those three, all big pharmaceuticals. Finally, the nightmare scenario, Kelly, for the market, remains the same, and that's stagflation. We continue to have high inflation, but with subpar growth. Now, the big issue right now is whether or not there's

signs inflation is slowing down. The big hope over the weekend, the Bulls kept pointing out that big decline in commodities we've been seeing. Not only metal commodities, but even agricultural commodities, this is the big one to watch here. DBB is the base metals ETF. That was in a 52-week low, essentially on Friday. You can see it's still flattish today. And Kelly, the bulls are saying this is the big hope here. If we can continue to get oil down, nickel down, aluminum down, copper down, that's a great sign for the Federal Reserve, possibly in September, starting to talk a little more moderately. Kelly, back to me. All right, Bob, thank you very much.

Now, let's look at the action in the bond market where yields have kind of been on the rise to start the week. Maybe Rick Santelli can explain it. Hi, Rick. Yes, well, I think a lot of this has to do with how happy everybody was that we had some deep green in the equity markets at the end of last week. There are so many analysts out saying, we're going to get a 10% bounce here. Well, they seem to have some pretty sharp pencil tips, but whether you believe that or not, it certainly seems to be. be pervasive and the more optimistic we're going to get a slight reprieve on some of the dark trading days on the equity side. It's brightening up a bit with respect to yields,

although that does mean selling treasuries to push yields up. And investors certainly bought into that. Look at the intraday of twos. They had an auction that ended at 1130 Eastern. You see that rate popping up? Five years had an auction that ended at one Easter. See the way that rate popped up? That's giving you very good clues that whatever seems to be changing as of late. It's changing without the same buying appetites that were held in treasuries not that many sessions ago. If you look at a three day of tens, three days, but we were down at three percent even on an intraday low. 309 on a low close. This is all after an 11-year high close, a whisker under 350 in mid-June, which means if you're a technician, 309, now becomes your

big area on the charts. If you're trying to look for higher yields, you'll put a stop on yields below that level on a closing basis. And if you look at a one week of boon yields, very similar. You know, they hit an eight-year high yield on the 23rd with a, excuse me, on the 21st with a close at 177. They got down to 135 on the 23rd. They're now in the mid-150s. Yields seem to have turned from optimistic moving lower to a little bit more aggressive to the upside. Kelly, back to you. Rick Santelli, thank you very much. Now, oil, this one, It's been kind of the counter trend story today. Closing up 2% as G7 leaders consider price caps on Russian crude.

Pippa Stevens has more at the CNBC Commodity Desk. Pippa? Hey, Kelly, well, geopolitical factors are in the spotlight this week. G7 nations are currently debating new sanctions on Russian energy, and OPEC and its allies are set to meet on Thursday. Now, crude has come under pressure recently alongside just about everything else and is on track to snap a six-month winning streak. But Goldman Sachs said that a distinction here needs to be made between commodities and other financial markets.

Commodities are spot assets, meaning that even if demand growth slows as it would during a recession, as long as demand outstrips supply, you can remain bullish. Other assets, meantime, are anticipatory, and so demand growth plays a much larger role, all of which means the firm is sticking by its target for oil to hit 140 this summer. Still a ways to go, though, for that to come to fruition. Crude WTI is up 1.7% at 109.46, brand crude also up 1.7% at 115 and 3 cents. Now, turning to energy stocks, the group is today's top performer, Valero, Devin and Hess Kelly, among the big gainers.

I love that distinction that Goldman's making their PIPA. Thank you for bringing that to us, Pippa Stevens. What about net gas prices? They're back to their lowest level since early April, down 25% this month. They're having their worst month since December of 2018. But world leaders in Europe are also currently grappling with energy security at the G7 summit. For more on how the sector is responding, let's bring in Toby Rice, the CEO of EQT, which is the largest producer of natural gas here in the U.S. Toby, it's great to see you again.

We're sort of idiosyncratically benefiting from some LNG port shutdowns and other factors here. What do you expect is going to happen with that gas prices as we move into the fall? Well, listen, I think you cited the drop in natural gas prices recently. You know, you go back a few months before that, we're talking about the extreme rise in natural gas prices. All of this just shows the incredible volatility that exists in the natural gas market today. Why does that volatility exist? It's because the supply demand fundamentals are so tight right now that you're going to see short impacts. You're going to have short catalyst, small catalysts are going to have big impacts on price movements.

And it's just a sign that, you know, we need to do more to put more supply into this world to reduce the volatility. But, you know, even where we sit right now, natural gas prices are still strong and they'll continue to be strong in the future. But, you know, clearly there's a sign that this industry can do a whole lot more, but we need some assistance to be able to get the infrastructure needed so that we can add more supply into this world. Okay. Well, if, for instance, U.S. producers were able to supply the world as it needs, what do you need to make that happen? And presumably, there needs to be an investment in infrastructure. How quickly could all of that get up and running, even if you're able to make. regulation were not an obstacle? Yeah. So very simple. We can get, we can build anything in this country, you know, in 24 months. LNG facilities is no different if you take regulation in the red tape out of the game. So if we have these energy facilities and the pipelines that need to

move the gas to those facilities, in less than 24 months, we could put gas on the doorstep of Europe for a cost of $9. And that would imply a $4 gas price here in the United States. Consumers in Europe would be thrilled to be getting gas at $9 because they're paying over $30 today. And American consumers to be getting $4 for the natural gas compared to the $6 today is a absolute bargain. The best news about this, though, Kelly, is it with that pricing structure, this industry can generate modest returns. And what that means is this is a profitable solution, which means this industry can finance this ourselves. It will cost the American government $0. The American taxpayer won't have to pay a dime.

And this industry can get to work, bringing the energy security to the U.S. and our allies around the world and replacing Russia's influence on the world stage. So that said, it feels like we're at a moment where we need to see a gathering of energy leaders or almost like a G7 type thing to

kind of explain to all the participants here. What does the U.S. need to do in France and Germany and all the rest of it? What are the producers need to do in order to hit these certain benchmarks? I don't feel like that level of coordination is happening. And I understand, you know, in the energy space, we don't want to recreate cartels. But does there need to be a globally coordinated effort to explain where all of this supply is going to come from and go in order to get us through the next, you know, 12, 18 months period of time?

Yeah, Kelly, I think it's really important to mention that, you know, leadership today is not responsible for this energy crisis that we're in today. This has been 10 years in the making. But I will tell you this, this leadership is responsible for how we get out of this. And the issues that we faced were simply an anti-hydrocarbon, anti-fossil fuel, keep it in the ground movement, has caused massive energy underinvestment and the current energy under supply today. The concerning thing that you need to hear think about is, you know, the energy crisis that we're in today, the high prices, the rampant inflation,

the war in Ukraine, oh, and by the way, emissions around the world are still rising. When leaders say that they're going to continue to double down on the policies that put us in the situation, they're doubling down on high prices, inflation, the war, Russia's influence on the world, and unfortunately that's not going to be a winning solution. Let's step back and refresh. The good news is we have a great solution. The United States could be a leader in solving this. We can unleash our American energy and provide the energy security to the world while

unleashing the biggest green initiative on the planet. And we can do it very quickly, but we're going to need our leaders to step back and reassess the situation. Well, climate scientists are saying that actually going toward now, gas gets the European countries, especially away from their commitments under the Paris Climate Accord. But all that aside, there's an immediate threat. They got to get through winter of 2022-23. You're saying two years you could have the infrastructure in place. Is there anything that American producers could do right now to ensure that there's some kind of energy stability in Europe this winter? Kelly, this industry is running at full tilt right now. You know,

We've been trying to supply energy to our allies, even before the bombs dropped in Ukraine. Since January, this industry has delivered over one trillion cubic feet of natural gas to our allies in Europe. And that, thankfully, has helped refill their gas tank and put some armor on them, even while they're, but make no mistake about it. They're still in the jaws of Putin. And we need to be doing more to give them some more security to help believe the situation. But we need to think about this right now is, you know, prices are surging in shoulder season months where typically you don't see the great demand. Well, now we're entering the demand season of the summer where people are going to be driving more. And prices are rising. Gasoline prices are unnecessarily high. And let's look forward to the winter. And natural gas prices are extremely high. In New England, they're going to be north of $20. And we're going to be selling that same gas here in seven. It's a sign that we don't have pipelines. But we need to look at the need to look at the little bit of urge. But I appreciate you joining us and always your thoughtful ideas on that. It's, by the way, Contessa, but it's not the first time I've been confused with Kelly.

I'm sorry, Contessa. That's okay. That's all right. Thank you for that. I appreciate it. See you soon. Planting good deeds, this startup looking to help recede forest decimated by wildfires. As we head to break, remember, you can now listen to Power Lunch on the go.

Look for us on your favorite podcast app. Follow and listen today. The brunettes are back right after this. Wildfires have devastated forestland in the American West, and the threat is worsening. Restoring the forests is vital in the fight against climate change. Diana Oleg joins us for her continuing series on climate startups with the story of one company flying into the rescue of this charred woodland. Hi, Diana.

Hey, Contessa. Yeah, drone seed is a Seattle-based startup that claims it can begin to quickly restore thousands of acres of wildfire ravaged land just 30 days after the fire is out. We're a one-stop shop for reforestation. Drone seed likens its fleet of drones to a swarm of bees, navigating rough terrain, carrying and dispersing thousands and thousands of seedlings. Each aircraft can plant three-quarters of an acre per flight. The aircrafts themselves, they are not what you can get at best by.

They're eight feet in diameter. They carry a 57-pound payload. We operate them in groups of three to five, and they're going out there and they're dropping seed vessels onto the landscape. in pre-surveied areas. Key to drone seeds model is the seedling production, which has been a major barrier to reforestation due to supply chain issues.

Drone Seed purchased Silva Seed, one of the oldest seed businesses in the nation. It's now expanding to become the largest private seed bank in the West, growing millions of new seedlings. How does it pay for all that? We provide offsets in the form of a ton of carbon removed from the atmosphere that allow those better actors to decarbonize

while other solutions come online. Carbon credits, which are being purchased by the likes of Shopify, a global commerce software company. It bought enough to remove 50,000 tons of carbon from the atmosphere. And in turn, drone seed is replanting 300 acres of forest lost in Oregon's Beechy Creek Fire two years ago. That climate benefit of planting those trees and drawing down carbon is what we're purchasing through our carbon credit purchase.

And so that allows us to balance out our unabatable emissions from our corporate footprint. Dron seat is backed by 776, DBL partners, social capital, Spiro Ventures and TechStars. Total funding to date, $36 million. Forest restoration is increasingly important now because of how climate change is increasing the severity of fires. In the past, less severe fires would leave the seed in the soil. and at the tops of trees. But the high severity fires we're seeing now, due to increased temperatures,

burn all the way up to the tops of trees and destroy the seeds in the soil. So there's much less natural regeneration, Kintessa. Yeah, and it destroys what we see in that level of soil as well, so it takes all the nutrients out of that. The drone seemed fairly small. So is there a way to speed that up, maybe on a faster, larger scale?

Yeah, you'd think that they could put big airplanes up there and do it faster just the way we see them put out. wildfires, but then again, you have the carbon emissions from airplanes, and you don't want to add to that. So until we get electric airplanes, you've got to go with the drones. All right, Diana, thanks. We want to flag a scoop that CNBC.com is reporting right now. According to a notice viewed by CNBC, Amazon will have two prime shopping events this year. The second one coming in the fourth quarter. It will be the first time the company will hold two shopping events exclusively for prime members in the same year. And it comes as the company gears up for

Prime Day, July 12th and 13th. The company's looking for ways to secure additional sales after booking the slowest revenue growth for any quarter since 2001. We saw that in its latest earnings report. So if you're thinking about buying ahead for the holidays, maybe you don't have to. Maybe you can have another prime. Are they self-cannibalizing? What if they just offer deeper discounts on Prime Day or Days? But then... And made it easier to find the deals you actually want. Right. There's a thought. Still to come, a potential defensive name. the volatility. Needham says the pet space is a safety play and sees Chewy climbing. That name and others in today's three-stock lunch next. Welcome back, everybody. Time for today's three-stock lunch.

And our focus is on consumer-related calls on stocks that are all down sharply this year. Not hard to find that. But we had Chewy upgraded to buy it, Needham. They're calling it a defensive play, saying the stock could rally 40%. They also downgraded Etsy. That's number two here to hold, citing recent pressure on the consumer and bed bath and beyond. Number three, cut to neutral at B. Riley today on lower store traffic. Let's bring in Jeff Kilberg. He's the chief investment officer at Sanctuary Wealth. Jeff, it's good to meet you here again. And let's start with Chewy. What do you think about the stock? Well, in regards to Chewy, I definitely agree. But let me bring in my top analyst here, Kelly. So, Callio Mac definitely wants to have a little bit of love on Chewy because he gets spoiled on this website a lot.

But it's interesting. This is a stock, Kelly, of good news and bad news. June 1st, the stock was trading $23.50. It's up 60% in the last month. That was the good news. But the bad news is it's still down 35% year to date. Again, revenue is growing 20% year over year, but they're not profitable yet. So this story of good news and bad news, I think does have more upside, but it's been a double whammy for them. Post-pandemic, you saw a lot of customers walk away, but it was also operating conditions that certainly deteriorate as. Costs have risen for them and supply chain issues still percent. But I think it has the ability. If you look technically, Kelly, has the ability to run back up to its tour-day movement is at $50, another $12 higher. So I'm a buyer. All right. Need them looking at the consumer and thinking maybe Etsy's not going to do that great, gets downgraded.

But it's a great place to find a perfect pooch accessory if you ask me. It is, Kintessa. And it's interesting. I want to be a buyer here as well. It's a really interesting stock. I've had to go on to look for that unique gift. Believe it or not. And Kelly may be, you know, at nauseam here.

but yes, I had to find a play like a champion sign that was handmade on Etsy. Etsy was the only place you could really find that. So when you think about this leading online marketplace, it's really interesting what they've done. They've absolutely been taken to the woodshed, right? But they have market penetration that's less than 50% across all the markets. We've also seen them have some acquisition. They spent like $2 billion last year on DIP. What did that do and why did they do it?

Well, if you look at DIP, that's how, you know, their active users, you know, are all younger than 26. They're introducing younger people to Etsy. So I think there is an opportunity, but technically it looks like it wants to regain its 50-day moving average. But Etsy is a name when you talk about where it's fallen from, Contessa. That 52-week high is $307. So there's a long way to go here. And you have to be careful with the name like this from a market cap perspective. All right.

That brings us to bed, Beth, and beyond. I'm trying to think of what your play would be here, both personally and professionally, Kilberg. Well, Kelly, you know, I love to say. like Will Ferrell and old school. I hope to get to bedbath and beyond tomorrow, but that's not the case here. I think you have to stay away. If you look at this chart,

it is absolutely a broken chart. When you talk about a high beta name, Kelly, this is a name that's not even $600 million from a market cap perspective. So wildly volatile, high beta, but it's a broken chart. It's down over 50% year to date. You know, you look at this chart, and I know you don't get tested to love to play some limbo there in England, Cliffs, New Jersey at the headquarters of CNBC,

but this is a limbo chart. How low can it go? I think you have to stay away. I want to close with one positive thing on bed, bath, and beyond. The fact of the matter is, it's up 500% since his IPO back to 1992. But in the last 10 years, it's down nearly 90%. Stay away at all cost. Look at that market cap.

$546 million. Tough times. Jeff, thank you. We appreciate that. Take care. Well, this is the beginning of the end. We're saying goodbye to the volatile month, the quarter, and the first half of the year. coming rebalance could shake things up even more. We have it next.

Welcome back to Power Lunch. Stocks slightly lower today, but as we head into the final days of the quarter and the first half, could we see a rally as money managers reposition in their portfolios? Christina Partsenevelas joins us now with more. What do you think, Christina? Well, there could potentially be a rally of 7% this week. And there are four major factors in this rebalancing cycle that stand up. Firstly, you've got markets. We know this that have been down for the first half of this year this past quarter. and then this past month, which is why a bare market bounce is gaining steam, and you've got some dip buyers in there. Secondly, liquidity has been low. J.P. Morgan Research shows that liquidity is

five times lower than the historical average. That's why stocks can swing drastically on any bit of news. Thirdly, investors are holding on to an excessive amount of cash on the sidelines, which means they could easily get back into the market and buy-up stocks should rally occur. And then lastly, with global markets under pressure amid fears of recession, short-selling has actually increased in any small uptick could call for some short covering pushing stocks up even further. And you're wondering maybe why did I say 7 percent? Well, near the end of the first quarter of this year, the market was down 10 percent and then experienced a significant rally of close to 7 percent, which you're seeing that little circle on the right hand of

your screen. And then on the most recent monthly rebalance near the end of May, we saw similar movements, almost a 7 percent rally again going into the end of the month, exemplified by the circle on your screen. So given the four factors I listed out, low markets, low liquidity, high cash pals on the sideline, and higher short interest as of late, along with historical regression, markets could rally 7% this week. All right, getting that, that would be like 14% to the NASDAQ in two weeks. You know, it's really interesting because we started off Power Lunch today with Barry Bannister calling for a 10% rally in the markets this summer. And now Christina Parts-Nabla is saying it could be 7%. So, you know, like, that's, you get worried when everyone starts to go, well, maybe it could all, you know, it's like, well, when everyone agrees on one thing, whether it's bearish or bullish, we often know how that plays out.

Yeah. Okay. Well, Christina, thank you for joining us. And thank you for the prediction there. Well, cash on the side, it just seems like there's a lot of places that you could deploy that, too, right? Not necessarily just equities. Yes. And let's do a quick check if we can of stocks, which are coming off a week where we've already seen some 7% gains in the NASDAQ, 5 to 6% for the major averages.

There's the Dow, the S&P, and the NASDAQ, all underwater today. The NASDA, the underperformer will call. And again, contest, I think we were both struck by the underperformance of the travel and reopening names that were, this was supposed to be their summer. I think that the headaches and the travel crunch that's happening now may have an undermining effect on some of these names. Definitely. And on the consumer wallet, all the rest of it. All right, everybody. Thanks for watching, Power Lunch.