Power Lunch - World AG Expo, Demand for Lab Grown Diamonds, CPI Report & Big Tech 2/13/24

Episode Date: February 13, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody. Welcome to Power Lunch alongside Courtney Reagan. I'm Tyler Matheson. Glad you could join us. Stocks are selling off today after a hotter than expected read on inflation this morning. Right now, the Dow is down 600 points on the button, Gordon. And as for the S&P 500, saying goodbye to that 5,000 level, at least for now. The NASDAX slightly underperforming today losses across the magnificent 7. InVIDIA bucking the downtrend. We'll have a little bit more on that later. No surprise, but the interest rate sensitive stocks are leading the way lower. look at the losses on some of the big home builders.

We will check in on lots of different stocks and sectors throughout the next hour. But let's begin with Mike Santoli and the bigger picture. Is today's drop an appropriate reaction to the CPI, a needed pullback? Something that, as we heard just a moment ago, Quint Taitro said, it's really a pullback would be a welcome thing here. Yeah, I do think all of that's in play, Tyler. The setup was at a pretty extended market. It was getting a bit overheated over.

But everybody was saying this for a while on that stretch. to 5,000. In fact, we haven't had a 3% pullback in the S&P 500 since October. That's an unusually long stretch of time without having at least a decent dip. We're not even there yet. You'd have to go down another percent in order to get to that 3%. So I think that makes sense just tactically to say that, you know, we've gotten a lot of profits built up that you can take. Now also, the CPI report, it did sort of disturb the happy picture of a glide path toward the 2% inflation rate and the soft landing that had been. largely assumed and priced in for now. And I think that whether, in fact, it changes materially

what the Fed does. I'm kind of less interested in that. I don't think stocks are really hinged on exactly when and how much the Fed cuts if the economy stays strong. But market interest rates are going up, right? Ten-year yield is above that four-and-a-quarter threshold, kind of back to where it was before the December Fed meeting. So a good excuse and really with some credence behind it for a gut check in the equity market. A gut check. But as I look at the CPI numbers, Am I wrong? But it looked like inflation was actually moving a little bit lower, just not as fast as prediction. No, that's true.

I think that you're able to kind of view this through a couple of different lenses, one of which is for those who are expecting the path down toward, you know, target to be a little bumpy. Or you got something to work with here because core, you know, core shelter, I mean, core services, inflation is not cooperating that well. I don't think it's alarming necessarily. first of all, the PCE is the Fed's inflation target. That's not something that's a one-to-one with the CPI. So, again, it's, look, we're only down in the equity indexes to where we were a week ago. So you could certainly have a lot more give back and still not have it really changed

the overall premise of this rally fundamentally in terms of a resilient economy and the Fed looking in months ahead to ease. All right. Mike, thank you very much. Mike Santoli reporting for us. We're also seeing a big reaction to that CPI report in the bond market. Interest rates moving markedly higher. Rick Santelli joins us now from Chicago. Hi, Rick. Hi, Tyler.

Indeed, it's a hot day and it's due to hot CPI. Let's start at the beginning. Let's look at year over year core CPI. Came out 3.9% today. That's a 10-year chart. You could see how it's leveling off. That's the problem. It's not continually moving straight down,

but nobody thought inflation would be linear. Now, here's the most important chart in my opinion, and I'll tell you why in one second. This is a year-over-year CPI core, which they start the index. This is the index that everything is derived from. When you say up three-tenths, down three-tenths, they look at two different indices. This is the year-over-year core. It started in 1957. Today it was 314.44.4.

It's never been higher. So here's the rub, okay? You've heard all the analysts today, smart economists, everybody with the number. one refrain and that is wow there's this seasonality with January it's called a reset of prices it happens at the beginning of the year prices go up but don't worry because January February most likely will moderate so what they're saying is is that that chart I just showed you a 314.44.4 if that goes sideways for the next couple of months inflation rate of change is going to be zero but

yet prices if you use a CPI calculate and the BLS website are still 20% higher based on CPI than they were pre-COVID. So part of it's for Wall Street. This will underpin the Fed's rate-cutting cycle, but it doesn't make the middle class feel very happy. As to Tyler's view of rates, wow. Look at an intraday of two-year. Big pop.

Now, two-year notes right now are on pace for not only the highest yield close of the year, the highest-deal close for two months. And 10-year, highest yield close since the end of November. number two and a half months. In the grand scheme of things, interest rates continue to look firm, but don't dispense the notion that today's report doesn't have some good news, because when the rated change goes flat, it most likely could be a green light for the beginning at some point nearby of the easing cycle. Courtney, Tyler, back to you. Good stuff, Rick. Thank you very much. The Dow tracking for its worst day in nearly a year following that hotter than expected CPI number.

So here with more on the sell-off is Mona Mahajan principal and senior investment strategist at Edward Jones. And I guess we'll just start out, Mona, if you think that this sell-off is an appropriate reaction to the data. I think Rick and others bring up a very interesting point about January being a reset month for prices. Yeah, absolutely. And look, I think others have brought up this point as well. But we moved almost 22% higher in a straight line in the S&P 500 since October 27th of 2023. So were we due for a bit of a pullback, a correction, at least a period of consolidation? The answer there is probably yes.

And was this CPI report a catalyst to get us there? Perhaps. And look, there was some disappointing data in the CPI. We saw shelter and rent components higher than we'd like to see. We saw headline inflation, which we thought we'd get a two handle on finally come in at 3.1%. But when we look broadly, the trend in inflation is still moving in the right direction. We were at 3.4% on headline last month. We're at 3.1% this month.

Core inflation remains flat at 3.9%. But we think there are signals that could get us to a more moderating trend even there. And specifically, we think the real-time data in shelter and rent pricing is moving in the right direction, and that will show up with a lag in the months ahead. So more broadly speaking, we do think that we could be due for a correction, but we don't yet see any tenants in place for a correction to become more nefarious, a bare market of any sorts, because we do see better inflation trends. We do see a Fed pivoting later this year.

And by the way, we see an economy that's holding up pretty well. And to your point there on the Fed, when the Fed looks at this, are they also going to look at the trend and say, well, look, we're going in the right direction, even if some of these components were a little hotter than expected, particularly that shelter and rent, or does this push out potentially their decision to cut interest rates, a meeting or so beyond maybe where they would have before this data came out?

Yeah, you know, look, the Fed has already told us that they want to be patient here, and they've earned that right. The economy was going in the right direction, and inflation was moving lower even as we got this better economic growth. So they can certainly be patient here, we think, until probably the June meeting. And we think now the market is pricing in somewhat of a more reasonable and better aligned number of rate cuts with what the Fed is expecting as well. So the market, as of this morning, looking at four rate cuts beginning in June. We're in the same camp, three to four rate cuts probably beginning in that June time frame. You know, keep in mind if the Fed were to do more than that, five, six plus, it's probably because the economy has faltered in some way. And if they're going less than that, zero, one, or two, it's probably because inflation is continuing to remain sticky.

And the economy is also above expectations in a more meaningful way. And so we think there's a sweet spot that's emerging, that's three to four rate cuts that gets the Fed gradually back towards a more normalized level of interest rates. And so we think what happened this morning is actually probably a healthy adjustment. We're looking at the Dow now down 660-some-odd points. I guess that would be the session low. I'm wondering, hey, the idea of rate cuts is anything but off the table now. It just looks like the trajectory may be longer to begin, maybe a little shallower, not as steep a decline, maybe not as many. But so long as the stock market is anticipating interest rate cuts, there's really no impediment is there for it to continue to move higher.

In other words, it's not as though the Fed or anybody is saying, hey, rate cuts are done. It's just a question of that anticipation before they start. Yeah, I think that's well said, Tyler. And look, I think when we think about what could create or drive a bare market. You know, usually it's if you're in a recession or entering a recession. It's also if the Fed is raising rates. And thirdly, you know, you have your unknown geopolitical risks or an external shock that could cause disruption to the system. Neither of those three are in place today. So which makes us, I kind of feel like if we are headed towards a period of volatility, a correction, that's really the opportunity, especially for those market participants that

really didn't get involved late last year when we got that very rapid rise in the S&P 500. So we would take advantage of periods of volatility. Position yourself for that potential for that Fed rate cutting cycle that we see emerging in the back half of this year. All right. Thanks, Mona. Good to see you. Mona Mahajan of Edward Jones. Appreciate it. The Dow down 660 right now, 1.7%. The S&P yielding the 5,000 market, 4938. And the NASDAQ, the biggest loser there, down 2% at 15623. Big Tech getting hit hard. The NASDAQ is, as I mentioned, down 2%. The software and Services, ETF, the XSW, down more than 2.5%. After the break, we'll speak to an analyst who's raising his price targets on a couple of key tech names. There you see them. Plus, consumer stocks in

focus, Coke and Moulson Coors raising prices, their earnings better than expected. But recently, consumer stocks have been reporting lackluster sales. We'll break down all of this when Power Lunch returns. Dowitt Session Lowe's down 672 points. Welcome back to. to power lunch. Market losses are accelerating there in the NASDAQ 2, down nearly 2% today after a hotter than expected CPI report this morning. And among those laggards are mega-cap tech meta, Amazon, and Alphabet. But my next guest recently upped his price targets on all three of those names, especially meta, hiking his target from $470 to $55, siding upside momentum driven by AI. Joining us now is Rob Sanderson. He's senior internet analyst at Loop Capital Markets.

Rob, thanks so much for joining us. I guess let's Start there with medicines. That was kind of a big price target hike. And I guess maybe today notwithstanding explain some of your reasoning there for why you see the upside potential in meta. Yeah, there's a lot of momentum. Obviously, surprise on the upside, very strong fourth quarter. But the outlook was really what caught people off guard and really unexpected. Revenue growth expected to accelerate by around 400 basis points to 29% at the high end,

which is obviously very impressive on numbers that are so large. And a comparison that gets 700 basis points tougher. You know, an acceleration on that kind of comp at this kind of scale is just, you know, kind of unheard of. It shows a lot of momentum behind the businesses. I think they've found a lot of unlocks in applying artificial intelligence to make advertising easier. Like that's, I think, the underlying story behind all that momentum. And, yeah, there's a lot to like at Meta.

Before we move on to some of your other names, I mean, I know AI is sort of the buzzword across all tech companies and really, I guess, almost all companies in general these days. But is there a risk as we go into this very potentially contentious election cycle of AI being used for not so good across social media platforms like meta? Yeah, and this company certainly has history on such issues. So it is definitely going to be a growing focus through the year. you know, the company has invested, you know, a lot of time and attention and resources and frankly money in just, you know, keeping bad actors off the site. That's always a cat and mouse game. There's always going to be, you know, potential for, you know, for ill intent on such a wide scale and influential platform, especially into an election cycle. So be assured, you know,

it's not going to come as a surprise. They're preparing for such interference and, you know, we'll see how they manage through this. What's working best for META? I think it's the ability for them to make it easier for the long tail of advertisers. It's small and medium businesses that are really what make META the envy of the industry. They stopped disclosing this metric three years ago when they hit $10 million, and we should definitely assume that it continues to grow. There's a lot of a focus on how the AI platforms are doing about.

better job of targeting for large advertisers. But it appears to me that that meta, you know, has really sort of cracked the code and is now unlocking a lot of value for the, for the smaller, you know, mom and pops. And they are comparing against, you know, pretty disruptive period where the, the changes on the Apple platform, you know, I think really, you know, took a lot of, it took a lot of time for those smaller advertisers to adjust. Rob, I want to move on to Google. I understand you have this as a hold, but you up the price target here from $140 to $155. Interesting, though, Google ads were up just 11% in the fourth quarter, while Meta grew their advertising revenues by 24%. So certainly not seeing at least as much momentum as meta here.

We have the Dow down just to alert viewers, down 700 points now. That's good for 1.8%. But again, Rob, back to Google here. I mean, what do you like here that you see upward momentum getting us closer to 155? When maybe it does not have the same types of momentum in an area? like advertising as meta. Yeah, I mean, the Google businesses are performing well, and management's very focused on cost discipline.

You know, I think the issue that maybe holds it back compared to some of its mega-cap peers is that Google's seeing more competitive pressure now than we've seen for a very long time. And, you know, in the ad business, it's the growth in social and the big numbers that meta's, you know, putting up. Retail media is becoming more of a competitive threat,

especially Amazon. But really, you know, the market's very focused on AI and particularly generative AI, as you mentioned earlier. And it's not clear that Google is, you know, going to be able to maintain their dominance. Like, it has been the best technology company for, you know, a couple decades. And now, you know, they're not leading the way. We just saw reports last night that Open AI reached a $2 billion revenue run rate

in the fourth quarter, the fastest company in history to do that. you know, Google's been investing more in AI than anybody forever. And here they are with a startup, you know, kind of stealing the show. So that's going to just, I think, you know, raise this wall of worry for investors and probably hold the stock back. All right, Rob. Thank you very much. Rob Sanderson. We appreciate your time today. Sure, thank you.

You bet. All right, let's talk about Nvidia, because we haven't mentioned in the last few minutes. It's turned lower after spending most of the morning in the green following some positive analyst commentary. But even this AI, darling, is not. bullet proof. Christina Portsnevelas looking at the challenges it's facing and it's got I think earnings next week, if I'm recalling correctly, Christina. Yes, next Wednesday and you made a joke about oh, we haven't spoken about Nvidia in a while. So that's why I decided to take a more contrary intake. This is a company that has surpassed Amazon in market cap yesterday and a bit today.

Witnessed a remarkable $500 increase in its share price over just a 52 week period. So it seems like this stock is pretty much invisible to bearer sentiment. With no cell notes from analysts in over nine months, it's easy to overlook potential concerns. But amid this AI euphoria, there are some cautionary flags that emerge. Wolf Research, for example, highlighting easing supply constraints, which may damp and chip demand in the later half of this year into 2025. Morgan Stanley questions the sustainability of NVIDIA's growth trajectory, forecasting a possible plateau in 2025.

Barclay's credit team, not sell-side credit, predicts the model. and demand as the industry transitions from training to the inference phrase within large language models, which means they need maybe fewer GPUs. There's also heightened competition from industry giants like AMD, Intel, and then also mega cap firms like meta and Amazon creating their own in-house custom chips, examples of what could erode Nvidia's GPU dominance. And then of course you've got looming threats of further tariffs to China, especially under a Trump presidency, which would drastically impact Nvidia's data center sales. The Berkeley's credit team also notes

Nvidia's venture capital arm made about 33 investments between January and October 2023, with the majority of those in Q3, and they suggest that Nvidia is actually financing startups who use and buy Nvidia technology, which implies that Nvidia could be possibly funding its own customers. Again, this comes only from one credit note, but 92% of sell-side analysts say otherwise, saying Nvidia is still a buy. I saw the highest price target today, what, $850 bucks heading into earnings which are out next Wednesday. Yeah, apropos those earnings that come out next Wednesday. Here's a stock that is on its tippy toes. And it is often stocks that are on their tippy toes that are vulnerable if there's

anything in that earnings report that is in the least bit nitpickable. You're right, which is, but in the options market is implying. some type of 8 to 9% move in the stock post earnings. But it seems, based off of all these analysts reports and all of their customer checks and inventory checks, it seems like the backlog issue is still concerned in the near term, which should help in video, you know, get that supply. Customers are still racing over each other to try to get these GPUs. So I'm sure Nvidia will make a comment about that.

They're going to comment about their AI event on March 18th, where we'll hear more details about their next iteration of the GPU. So there's a lot of positive factors that could help this stock propel forward, even if they don't have that massive beat that we saw the previous two quarters. Yeah, absolutely. Christina, thanks very much. You'll be following it all for us, I am sure. Christina, parts in Nevilleis. After the break, we will dive into some moves in the energy space. Check out the solar stocks. The tan ETF, down 5%. We'll be right back. Welcome back. The Dow is now down 715 points, closing in on 2%. We've slid, more than 100 points in just the last half hour or so. Let's zero in meantime on energy. The cold weather and snow on the East Coast, yes, the first snow of scale in about two years,

helping that gas today. Pippa Stevens joining with a look at that and all the big movers in energy. Pippa. So it's actually not helping that gas. So we have the snow on the ground outside and that gas is down another 4% today and falling to the lowest level since July 2020. continues to be these four key headwinds, that's elevated storage, record production, this really warm temperatures that we've seen apart from today in that one brief spell in January, and then also the outage at one of FreePorts, one of their three LNG trains. So that's having an impact because that cuts demand. And so this drop in Nat Gas now at 169, that is bringing down Nat Gas stocks,

so names like EQT, Kota, Chesapeake, and Southwestern, all in the red today. Now, notably, EQT is the largest Nat Gas producer in the U.S. and they do report earnings after the bell today, so we'll hear what they say. Moving over to oil, which is actually in the green and shrugging off the hotter than expected CPI report. So Dennis Kisler over at BOK told me it's several things, including lower Russian exports, as well as technical factors helping with WTI above the moving averages. Now, this strength today, though, is not enough to lift energy stocks, which are lower across the board.

However, there are a few notable ones bucking the trend. You see there, Marathon Petroleum and Phillips 66. those two names are in the green. And then finally, one name, one area rather, that's definitely not shrugging off the inflation report. You see it there is solar stocks, the tan down almost 6%. It is those residential installers, Sun Run, Sinova, and Sunpower that are all down more than 10%. They are very sensitive to higher rates. It makes their capital expenses more costly.

And then also it makes systems more costly for consumers, which leads to softer demand. So a lot moving within energy broadly today. So solar down and you explain that well, but I still don't quite understand the move in crude oil today and why that's not lower. Well, crew's been going sideways for a very long time. And so I think that, you know, we've seen kind of these oscillations between the current like $78 level. So I don't think there's so much of a fundamental shift today, but it is above those key moving averages. We did see some slowdown in the Russian export, but, you know, not a meaningful move by any means. I did say that one trader said that the next thing that's going to impact prices will be the,

Fed rate cut. And so we're going to be trading in a range for quite some time it would appear. But like you said, stroking off the CPI report, which is bucking the trend of almost every other asset class, it seems today. Thank you very much, Pippa. Well, let's get over to Kate Rogers for CNBC News Update. Hi, Kate. Hi, court. President Biden just called on the House of Representatives to quickly take up the supplemental aid bill, saying opposing it and the Ukraine aid within it is, quote, playing into Putin's hands. He also blasted former President Trump's comments criticizing NATO. NATO will reportedly announce tomorrow that most of its member nations will hit defense spending targets this year. That's according to a report in the Financial Times, which says the

alliance will report that 18 of 31 members will hit the target of spending 2% of gross GDP on defense and that it expects two-thirds of the alliance to eventually hit that goal in 2024. And an iconic site along the Paris skyline visible again after nearly five years. The new spiretop Notre Dame Cathedral finally revealed after the 2019 fire that nearly destroyed it. The original spire crumbled as the flames engulfed the cathedral. Back over to you guys. A wonderful, a wonderful thing to see that go back up. That was a frightening day.

Thank you, Kate. All right, we will continue to watch all the market action. As you see there, the down 700 points on the nose continuing to make new session lows. The NASDAQ off more than 2%. S&P 500 down 1 and 3 quarters percent. concerns about the consumer and the Fed weighing on stocks following a CPI report that came in hotter than forecast. That is causing big losses for payment stocks like a firm down 11%. More on that in a minute as we had to break a quick power check on the positive side,

EcoLab, up about 8% Moody's down roughly the same. Welcome back to Power Lunch, everybody. Stock's falling today following a hotter than expected read on inflation this morning. interest rate sensitive, consumer-facing stocks getting hit the hardest. Let's go to Kate Rooney now for more on Affirm the payments company, Kate. Hey, Charlie, that's right. So this morning's inflation report really dampening an appetite for growth stocks and then some of the unprofitable tech names.

Affirm is in both of those categories. It's been sliding since reporting results last week, quarterly numbers, and the outlook it was good, but the bears are arguing not quite good enough to justify the stock's recent run-up. And then you got Block, formerly Square, another growth name, getting hit despite an upgrade today, benchmark initiating that stock, $89 price target, that implies about a 30% upside to that stock. They say management has, quote, plenty of runway for increased profitability. And then you got PayPal, another name that's lower today.

Continuing that cost-cutting mission turnaround plan under new CEO. Shares are lower, though, guys. Back over to you. Thank you very much, Kate. Well, let's keep our focus on the consumer, but a slightly different area. Coca-Cola and Molson Coors, both reporting results this morning. And both companies talked about higher prices. Let's bring in Sarah Eisen.

And now with more, Sarah, this was fascinating. I understand Coke mentioned the word inflation 36 times, and it's 67-minute call. And you also spoke with the CEO. I did. And you know what's funny about that, Courtney, is clearly prices are still driving growth at some of these companies, food and beverage companies. When you look at the breakdown of price mix or net pricing, global net pricing, that's positive. And it's what's driving the revenue growth. However, it has come down.

And increasingly, what I'm hearing from these CEOs and executives is that prices are moving back to normalized levels where you have a normal rate of inflation of around 3 to 4%. Listen to how James Quincy, the CEO of Coca-Cola, who was on Squawk on the Street earlier, described the pricing environment. But really getting into the ballpark of landing, not too dissimilar to the CPI, which has come from elevated levels. Yeah, it might be slightly harder to get from 3 to 2, but it's getting close to the kind of normalized. levels, and that's what we see in 2024, a kind of a normalized level in the 95% of the business with the overlay of some hyperinflation. Normalized is increasingly what I'm hearing about the inflationary environment with food, beverage, and household products makers. Now, inflation, as I mentioned, is still driving things. We saw nine, at least nine percent pricing growth in the

quarter, but to Quincy's point, a lot of that had to do with some of the hyperinflationary environments where they operate, countries like Argentina or Turkey, where they're saying, outsized pressures. That's also driving a big currency hit as well. And I'll also just say on Cours, if you look at the conference call and hear what they had to say, expect net pricing to revert to historical levels. That's what the company says. In the U.S. and Canada, it's approximately 1 to 2 percent. So Courtney and Tyler, disinflation is happening in the food and beverage space. It's coming back down to normal levels, but it might not feel that way to ordinary Americans who are shopping all of us at the grocery store because there's so much high.

than they were several years ago pre-COVID. Right? We're not seeing outright deflation. Let me understand the hyperinflation part of this. In those countries where it is a problem, like Argentina, the issue there is that the consumer does not have the money to spend on a little luxury like a Coca-Cola. Well, that and the inflation rates are just sky high. They're so high.

Yeah, like 50% inflation rates. So Coca-Cola has to price their items so much higher on the grocery store shelves there. So, yes, there's consumer pressure. And that becomes a barrier to the consumer to buy it. Absolutely. And it also adds to pricing growth in the top line because Coca-Cola is raising prices to that extent. But it hurts them on the currency impact because the currencies get devalued so much that that ships away at all that money when Coke has to, because it's an American company, bring it back home. Talk to us. Talk to us. Sorry, go ahead.

I was just going to say, Sarah, as I think about this, you know, some people are just very loyal to Coke or Pepsi. If that's a drink that they drink fairly regularly, it seems to me like the demand is fairly inelastic. Maybe that's only in countries where we have inflation under control, like the United States. We're not talking about Argentina, I guess. Is that wrong? Do these companies really need to revert back to historical levels, or can they afford to keep pricing where it's gone? Well, I think that they tend to track the cost inputs. And if the cost is coming down, then they're not going to, they say, at least they're not going to do consumers to preserve margins and just keep the pricing levels high.

You're right, they're consumer staples, but every consumer has a pain threshold. And what we've seen beyond, you know, Coke really, Coke had higher volume growth, so did cores. But the theme of the earnings this season for packaged goods and beverage companies, Courtney, has been lower volumes. We've actually seen those volumes go negative. So there is a point in which the consumer says, you know, no more and it really starts to hurt. So what the companies need to figure out right now is that balance where they are still growing and still getting that pricing, but at the same time getting volumes back up. And I would add another complication is the White House has really made a big political point lately of pointing their finger at food companies,

at grocery companies, for keeping margins high at a time where their costs are full. falling down. Lail Brainerd was on, to walk on the street with us this morning, the NEC director from the administration. And we talked about the today's CPI report. And food at home, inflation did see a jump month over month, but year over year, it's come down for about 17 months straight. And she said, look, these food companies need to keep bringing their prices down to match their costs. So they're really being held to account here when it comes to the administration looking for, looking for scapegoats on the inflation story. Yeah, certainly a political focus. Sarah, thank you very much.

Thank you. Well, Valentine's Day is tomorrow. Hint, hint to everyone. And the market for fine jewelry has actually changed dramatically in the last several years. So in 2020, only 2% of engagement ring diamonds sold were lab-crown. This is according to Angara's CEO in Kordaga. By 2023, though, 50% of engagement ring diamonds were lab grown in three years, which are chemically, optically, physically identical and certified real diamonds by the FTC. Lab grown now costs 75 to 90% less than a natural diamond.

And natural diamond prices are down 35 to 45% in just the last 18 months. It's opening up the market for diamonds to more consumers. The jewelry industry worldwide is roughly $330 billion in revenue. I think that actually within a decade gets to a trillion dollars. So it triples. Another trend, Brilliant Earth's CEO, Beth Gerstein and Signate Jewelers tell me consumers, particularly Gen Z are leaning more toward colored gemstones to express individuality. And just as demand for gemstones is increasing, wouldn't you know it?

The world's supply of natural gemstones is dwindling. So you put that together, gemstone prices are appreciating faster than the SMP 500. Tourmaline prices, for example, are up 36% a year over the last three years. Ruby prices are up 17%. Tyler, I know this pain specifically. I've bought both a Ruby and a tourmaline ring. over the last three years because they are my children's birth stones. And I was sort of surprised at the prices.

And now I know why. You can't put an S&P 500 on your finger. You can't. You cannot do that. Would it matter to you if you found out that Jared gave you a lab-grown diamond as opposed to a natural mind diamond? I think several years ago it might have. But now that I really understand that lab-grown diamonds are chemically, physically, optically

the same as a natural diamond that came from the earth? I don't think it would. I mean, the FTC certified it. And from what I've come to know, the more perfect and a natural diamond is, the harder it is for a jeweler to tell them apart under the special eyedlasses. They cannot be told apart because they are real, in fact. Interesting. Yeah, fascinating. All right. Still ahead. We will get some technical support. Our chartist will tell us which name he's watching for the long haul when power. lunch returns. Well, welcome back to Power Lunch. Time now for some technical support. We have three stocks making some technical moves that we want to bring into focus for you. Our chart is today is Jay Woods, Freedom Capital Markets, Chief Global Strategist. First up, the Russell small-cap ETF. Jay,

you say the relevance of this chart is to show the rally may be broadening out. Well, maybe not so much today, Russell 2000 down a good bit. We're hoping that this rallies out. What we've had here is a ridiculously long base, about 18 months. It looked like it was breaking out. It broke out above 200, and then it failed. A lot of people called this what we say, a bull trap. And if it was a bull trap, we would have had a fast move back down. We didn't this time.

Something changed. It held the 50-day moving average. We're testing it again right now. We are at that threshold. If you're trading this, you're watching 194 very carefully. I'd probably stay away from it and buy it a little bit more on strength. But 49% of this index are industrials, financials. and health care. Those sectors are starting to act stronger, except for the regional banks and the

financials. But it looks like it's poised where it's finally going to get out of this chop zone, this hot mess zone, as we like to call it, and hold these moving averages. So any pullback, I think, I think the story's changed. I think we can buy it on weakness. And your risk reward, it's still 23%. The moving average is the lavender line there. And what's the other one? What's the tope colored one? The top. A tope, I don't know Toepe, but... The top is this brown or whatever? That's dope. I'm learning something new every day.

That's the 200. It's a mess. Like I said, what you want to watch is this 200 level, and you want to watch it not make a new low get out of this chop zone. It's going to take some time. But over the long term, I think we rally and we break out of this zone. We form maybe a zone a little higher.

All right, let's go to Coin. Shares down today. Coin reports fourth quarter results Thursday. What are we seeing in the technicals on that one? Yes, very important to watch earnings. It has, moves of plus or minus 8% on average during earnings. We're watching a little weakness today. The stock had made a tremendous run after breaking out of this nice base.

It ran to about 190, 187 to be exact, and it's pulled back. Where did it pull back? Old resistance became support. So we're watching this level very closely. I think any pullback on earnings, given that Bitcoin is at 50,000, given a Bitcoin has a little more to legitimacy, it's an asset class here to stay. I think Coinbase is poised to reverse and climb higher. You have good entry points around this 115 to 120 area.

And if we can gap up above the 50, I think we can run back towards 190. And guess what? Over the long term, it has a lot more to reverse. When they went public, they went public at 250. It spiked as high as 387, I believe. I don't think it's going to go that tremendously to the high side. But the risk reward setup, the entry points are there. You can buy on weakness if it holds 120 to 115.

and then on strength, I think it rallies. It rallies to 190. So you have two possible entry points on a miss or on a hit with his earnings on Thursday. All right. Let's move on to ICE Intercontinental Exchange. What are you watching on this one? Well, let's talk a little bit about the long term. This is a stock that over the long term is in such a nice place.

And what happened? We had two blips. One was COVID. All right. Everyone suffered during COVID. And then in 2022, fair market. They made a big acquisition of companies. call Black Knight in the mortgage space, mortgage technology. That acquisition has finally been

brought into the fold. And what have we seen? We've seen slow and steady strength like we've seen in the past over 10 years. It's at this 135 level. It just broke out on an intraday. Now this is 10 years weekly, so it gives you a broad base. I don't want to just pick stocks you can trade. I want to pick stocks you can buy, put away for the long term that you're not going to worry about. And the exchanges are good places to be historically. And ICE is the premier of the three exchanges that I follow, NASDAQ and CME. And I think it's poised if it comes back on weakness, again, to buy over the long term, this 125 to 130 area is a good pullback. And then if it breaks out, I think we start another long channel to the upside over the long term.

Ice. Not on the rocks. Ice. All right, Jay, thanks. Courtney. Good to have Jay here with us in studio. We'll still ahead. Innovation is sweeping the agriculture industry.

but as some farmers struggle to stay afloat will demand for these new high-tech tools to windle. Our own Jane Wells gives us the details next. 57% of black business owners were denied bank loans at least once when starting their business. That's compared to 37% of non-black owners. Despite this, many African-American entrepreneurs report feeling optimistic about their futures. Celebrating Black Heritage, I'm Sharon Epperson. Well, welcome back to power. Launch time now for some technical support.

We have three stocks making some technical moves that we want to bring into focus for you. Our chart is today is Jay Woods, Freedom Capital Markets, Chief Global Strategist. First up, the Russell's small-cap ETF. Jay, you say the relevance of this chart is to show the rally may be broadening out. Well, maybe not so much today, Russell 2000 down a good bit. We're hoping that this rallies out. What we've had here is a ridiculously long base. About 18 months.

it looked like it was breaking out. It broke out above 200, and then it failed. A lot of people called this what we say, a bull trap. And if it was a bull trap, we would have had a fast move back down. We didn't this time. Something changed. It held the 50-day moving average. We're testing it again right now.

We are at that threshold. If you're trading this, you're watching 194 very carefully. I'd probably stay away from it and buy it a little bit more on strength. But 49% of this index are industrials, financials. and health care. Those sectors are starting to act stronger, except for the regional banks and the financials. But it looks like it's poised where it's finally going to get out of this chop zone, this hot mess zone, as we like to call it, and hold these moving averages. So any pullback, I think, I think the story's changed. I think we can buy it on weakness. And your risk

reward, it's still 23%. The moving average is the lavender line there. And what's the other one? What's the tope colored one? The top. It's hope. I don't know Tope. The Tope is this brown or whatever. That's Tope. I'm learning something new every day. That's the 200. It's a mess. Like I said, what you want to watch is this 200 level, and you want to watch

it not make a new low, get out of this chop zone. It's going to take some time. But over the long term, I think we rally and we break out of this zone. We form maybe a zone a little higher. All right. Let's go to Coyne. Shares down today. Coin reports fourth quarter results Thursday. What are we seeing in the technicals on that one? Yes, very important to watch earnings.

It has moves of plus or minus 8% on average during earnings. We're watching a little weakness today. The stock had made a tremendous run after breaking out of this nice base. It ran to about 190, 187 to be exact, and it's pulled back. Where did it pull back? Old resistance became support. So we're watching this level very closely. I think any pullback on earnings, given that Bitcoin is at $50,000, given a Bitcoin has a little more to legitimate to me, it's an asset class here to stay.

I think Coinbase is poised to reverse and climb higher. You have good entry points around this 115 to 120 area. And if we can gap up above the 50, I think we can run back towards 190. And guess what? Over the long term, it has a lot more to reverse. When they went public, they went public at 250. It spiked as high as 387, I believe. I don't think it's going to go that tremendously to the high side.

But the risk reward setup, the entry points are there. You can buy on weakness if it holds 120 to 115. And then on strength, I think it rallies. It rallies to 190. So you have two possible entry points on a miss or on a hit with his earnings on Thursday. All right. Let's move on to ICE Intercontinental Exchange. What are you watching on this one?

Well, let's talk a little bit about the long term. This is a stock that over the long term is in such a nice place. And what happened? We had two blips. One was COVID. All right. Everyone suffered during COVID. And then in 2022, fair market.

They made a big acquisition of companies. me call Black Knight in the mortgage space, mortgage technology. That acquisition has finally been, you know, brought into the fold. And what have we seen? We've seen slow and steady strength like we've seen in the past over 10 years. It's at this 135 level. It just broke out on an intraday. Now, this is 10 years weekly, so it gives you a broad base.

I don't want to just pick stocks you can trade. I want to pick stocks you can buy, put away for the long term that you're not going to worry about. And the exchanges are good places to be historically, and ICE is the premier of the three exchanges that I follow, NASDAQ and CME. And I think it's poised if it comes back on weakness, again, to buy over the long term. This 125 to 130 area is a good pullback. And then if it breaks out, I think we start another long channel to the upside over the long term. Ice. Ice. Not on the rocks.

Ice. All right, Jay, thanks. Courtney. Good to have Jay here with us in studio. Well, still ahead, innovation is sweeping the agriculture industry, but as some farmers struggle to stay afloat, will demand for these new high-tech tools dwindle. Our own Jane Wells gives us the details next. 57% of black business owners were denied bank loans at least once when starting their business. That's compared to 37% of non-black owners. Despite this, many African-American entrepreneurs report feeling optimistic about their futures.

Celebrating Black Heritage, I'm Sharon Epperson. Welcome back to Power Lunch, everybody. Farm equipment, now more innovative than ever, but manufacturers will have to really stretch their creative when it comes to reeling in buyers. Our own Jane Wells joins us live from the World Ag Expo in Tulare, California. Did I pronounce that right, Jane? I think I blew it.

Jane Wells. It's Tulare. You're very close, Tyler. Thank you. Yeah, about 100,000 people are expected out here. Now, look, this is a bailer and a tractor from New Holland, which is part of CNH. What's new this year is over the cab there. They've installed LiDAR, light detection and radar,

so that as you go into the hay field, it can sense it. It'll control speed and steering to, quote, optimize flow and make the operator's job easier. So less fatigue. We're actually seeing some fuel savings, as well as the ability to run longer days. Now, the LiDAR is an aftermarket add-on, which is good thing.

You don't have to buy a whole new system. We're talking over $600,000 here. That's much cheaper, and that's a good idea because if you look at it, commodity prices are down. Tractor sales are down, and farm incomes are going to be down for the second year in a row. I've got to be going right there. You don't even have to pay for that one. Yeah, Ryan Jacobson is a fourth generation almond grower up the road, but he's coming off a tough year. He's not in a buying mood yet.

I'm bullish that maybe in the next probably 18 months we're going to see us, you know, hopefully going through the bottom of the cycle already and maybe slowly starting to climb out of that. So in this environment, manufacturers have to get creative at Deere and Gus, where they've got the first electric autonomous weeder and this autonomous sprayer. Those are six figures, but maybe a farmer can just pay by the acre? There's these interesting business models that we're entertaining around spraying as a service. So Deere reports on Thursday, CNH tomorrow, and guys, it's all about their outlaw.

Look, we'll have to watch. Back to you. So tell me a little more about spraying as a service. In other words, you would come in and instead of buying your own equipment to do it yourself, you would hire a vendor to do it. Exactly. That's sort of something that, at least in Deere's case, they're trying to think of these other ideas in this environment.

Because, again, you buy, this is a huge investment, and you hold onto it for a long time. When they already have software as a service on many of these items, maybe they can just start sort of leasing out the equipment to that sort of way or bringing in the sprayers, as you say. Maybe that's a more affordable, enticing way to get sales. In this, you know, until farm incomes start to turn around and crop prices start to go back up. Well, it looks like a beautiful day in Tulare, California. We've got plenty of snow. Jane, thanks very much, as always.

Great to see you. All right. All right, let's take you through the markets right now and do a quick market check on a day where the Dow Industrial is having their worst day in percent decline. Well, now now it's 750 in point decline since last March. That caught me by surprise, but it is, I am assured, I am assured an accurate representation. We've got the NASDAQ down 363. There you see the intraday on the Dow Industrials. NASDAQ down more than 2%.

The other index is down about the same, a little less than 2%. Let's take a look at the 10-year yield as it climbs up close once again to 4.4. Well, it now is above 4.3%. It was settling most of the morning there. at the high sort of 4.28, 4.29 level as interest rates rise in the anticipation that the Fed will be less quick and maybe less frequent in their interest rate cutting regime and maybe won't start it until later in the year. Right. And when you're looking at the sector's real estate really under pressure, which makes sense, interest rate sensitive, down more than 3% just here on the session. Healthcare is performing the best, but it also is down more than 1% here on the session. and then right sort of in the middle is financials, again, also very interest rate sensitive down about 2%.

Yeah, those home builders that we just showed there with 2, 3, 4% declines in price today. Scott Wobner will be along in just a moment to carry you through to the close here in this very, where the winners and losers get separated. The final hour is coming up. Thanks for watching Power Lunch. Closing bell does start right after this quick break.