Power Lunch - Worst week in a year for tech stocks 9/6/24

Episode Date: September 6, 2024

The S&P 500 is falling today, and headed for its worst week since March 2023, as investors assessed a weaker-than-expected August jobs report and ditched technology stocks. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch on this Friday afternoon. Alongside Kelly Evans, I'm Dominic Chu, and the market is dealing with three new big items today. The jobs report, Fed comments, and Broadcom earnings as well, stocks lower across the board after another weaker than expected jobs report, 142,000 jobs created in the month of August and substantial downward revisions to the months of both June and July as well, Kelly. And look at where the 10-year yield is now. We were below 370 earlier, we're 3.71%. And remember, this is going to put downward pressure on mortgage rates, which could be headed towards the low sixes.

Maybe we're not quite there yet. But moving on from jobs, we also got comments from Fed Governor Christopher Waller, equally, if not more important to the market reaction today, signaling the time has come to start cutting rates and potentially being open to bigger cuts sooner, front-loaded, so to speak. And then those broadcom results, as mentioned, the results met expectations, but the guidance was not raised. and the stock is now down almost 10% hurting chips across the sector.

And now that has having ripple effects. The NASDAQ is down 5.5% just this week alone. It could potentially end as the worst week in more than two and a half years if this pace continues. We're off about nearly 2.5% just today alone, Kelly. Yeah, indeed. So here's what's happening in a market in today's sell-off. A product of elevated expectations, is that what we're seeing?

And where do stocks actually go from here? Let's now bring in Mike Bailey. He's the Director of Research at FBB Capital Partners and, of course, Stephanie Link as well, the chief investment strategist and portfolio manager at Hightower. She is also a CNBC contributor. Thank you both very much for being here. Perhaps Stephanie, we'll start with you on the broader picture. Is this market sell-off, especially the tech side of things, surprising given what we've seen

over the last couple of weeks? Well, I think the choppiness is really tied to the growth concerns in the economy. The growth is definitely slowing, Don. I mean, we grew GDP last year at 3.4%. Remember in the third quarter, we grew GDP 4.9%. You're now tracking at about 2.2.5%. And that's actually where the Atlanta Fed tracker is for the third quarter. So we are slowing, but I don't think it's a recession.

I'm looking at ISM services. They're still an expansion. The retail sales numbers were pretty good, four times the expectations from the government. And factory orders were also better than expectations. Not everything is perfect. Jobs are definitely slowing across the board, non-farm payrolls, ADP, initial claims. So we're slowing, but I don't think it's dire. And by the way, I would also just highlight that within all of the job reports that we got this week, wages are actually still strong. Wages in ADP were up almost 5%. And if you switch a job at 7.3%. And the average hourly earnings today in non-farm payrolls grew 3.8%. These are year-over-year figures. I think the consumer is still hanging in. We're just slowing down.

Mike, there's a little something for everybody, whether or not you're an optimist or a pessimist. And I've heard that word, the proper noun thrown around Goldilocks. You hear it quite often with regard to some of these economic reports. Do you feel as though today's report was both bad and good enough to call it Goldilocks? I think there's definitely a mix of good and bad. I think in general, just based on the market reaction. It was too cool. That's the final answer, if you will.

So certainly wasn't a terrible jobs report. It wasn't incredible. Unfortunately, expectations were really high. So we're seeing almost a repeat, but we got a month ago. We've got high expectations. Oh, by the way, bad macro and bad micro. You mentioned the Broadcom results coming out and disappointing. So unfortunately, when investors expect everything to be working perfectly,

you get a tiny wrinkle in there, especially on the macro. It comes a day after a bad semi-result. this is what you're looking at. So kind of a mixed result, not the worst thing in the world, but definitely a tough way to end the week here. Steph, I just want to go back to Broadcom for a second because you were one of the early voices saying that this was, you know, the right horse to bet on. And look at what a run that it's had. It was just put in a position of the MAG, the eighth component of a theoretical MAG8 by our guest's last hour. So is this 10% pullback for you a buying opportunity or are the best

days behind us now is a time to, you know, move to the sidelines and look for, you know, the next big movers, the next great stocks. I think you can leg into it, and I absolutely will be doing that next week. The stock was up 36% year-to-date, headed into the print, up 63% in the past year. So it's had a heck of a run, as you mentioned. I did not think that the quarter was bad or disappointing at all. In fact, I mean, I thought that the commentary around VMware and the margins and the free cash flow really were very impressive.

The problem was the cyclical. part of the business, not the AI. That's what everyone got jazzed up about, myself included. The cyclical part of the business didn't see a recovery, but orders in the quarter for the last two quarters were up 20% in the cyclical parts of the business. So that's to come. And then you have the whole AI revenue bump that they actually increase their revenues for that segment as well. So I think that this CEO is very conservative. And anybody who was expecting a massive guide up, obviously is disappointed, but I was not expecting that. So I'm definitely looking long-term and I'll be buying it.

Really, really interesting. And just to kind of dwell on this, because we are seeing the chips go down in sympathy here. We've seen Nvidia under, could it be a 30% drop in recent weeks as well? Are there any other tactical moves you'd make where you say, okay, the sell-off based on then the concern around Broadcom, the whole, all of that is unjustified? Well, all of these sucks have had a really nice run. one and their mother owns NVIDIA at this point. So I just think you've got to let the dust settle on that one. Maybe you let the dust settle on Broadcom too. I have to tell you, the one name I've been adding to, it's not semis, it's crowd strike. Because that stock was down as much as 41% from its

high due to the outage issue. And their quarter was very good. Earnings grew 40%, revenues 30%, retention 98%. So there are places where I'm picking and choosing. All right. So Mike, let's talk about the places that you are picking and choosing. What's on the shopping list for you. Is it still in tech like Nvidia? Is it elsewhere in the market? Absolutely. Basically, you want to stay diversified. So you want to own a little bit of everything. Certainly a lot of very nice high growth names are on sale.

We've talked about several. I know Broadcom is certainly an interesting way to place. I think Nvidia for us is pretty compelling here. Stock is basically trading at a multiple in line with Apple and Microsoft. If you think Nvidia grows faster than those names, maybe it deserves a higher multiple. So that's interesting for us here. A couple of other things just to make sure you've again got well done. versus by portfolios. Chevron, folks looking for some income that's trading towards the upper

end of its range, around a 5% yield. Pretty compelling. And for someone looking to clip some nice coupons there. And then Visa, generally a higher growth company, it slowed down a bit. Investors are really penalized in stock right now. So it is on sale. Maybe not quite as much growth as it had in the glory days. It's still pretty compelling. So certainly a lot of names to own out there, a bunch of high quality stocks on sale. So we're very interested at this point. All right. Thank you both. Yeah, Stephanie Link, thank you guys very much for that. Let's drill down now on the August jobs report, which was weaker than expected.

Payrolls at 142 below the 161,000 estimate. The unemployment rate, though, ticked down to 4.2%. And according to data from online employment marketplace ZipRecruiter, online job postings are down more than 7% over the past year, but also up slightly in the past month. Julia Pollack is the chief economist there. Julia, it's good to have you. So do you think a slightly better tone in the past month to the labor market is, for real?

I don't. I think the broad trend is that the labor market is slowing and slackening. And I think this report was not reassuring. It was not very strong. We had these larger visions to the prior two months. And job growth is very, very narrowly concentrated. The number of jobs added in the private sector outside of health care was just 74,000 in the last three months.

That's been around 30,000, well below the pre-pendemic average of 137,000 a month. Even though you saw a ever so slight increase or uptick in job opening. So it sounds to me like you guys would more confirm the overall kind of downbeat signals we're getting from the official joltz measure and so forth. Yes. And we just computed our job seeker confidence index today. Job seekers registered the lowest levels of job seekers sentiment that we've seen in the history of our survey. They're finding it harder to get a job.

They are becoming less likely to negotiate. their offers more desperate to accept the first offer. So we're seeing clearly among job seekers that they're having a much harder time. Also, about that unemployment rate, it really didn't budge at all. If you look at the unrounded figures went from 4.25% to 4.22%. That's basically an imperceptible change. It was all rounding that made it look like a rosy decline. I think it's interesting because we talk about some of the in-line rounding type errors.

One thing that we didn't see was a less significant move in terms of wages. It was actually decently significant. It was 3.8% year over year that for right now puts it above inflation. Where are we seeing in the job market right now the gains being driven by? What sectors, what industries, what types of job seekers are actually getting paid more in this kind of environment as opposed to maybe nothing or less? So we're still seeing about 5.5 million people being hired every month. This is a huge economy. It's very dynamic and there are jobs to be had. But the demand for workers is quite narrowly concentrated in a few places.

In healthcare demand is strong for everything, from physicians to physicians' assistants, to nurses, to nursing assistants. We see huge demand in the skilled trades and for engineers, physical engineers, electrical engineers, industrial engineers. There's also a tremendous demand in the government right now for police officers, for teachers, for people in law enforcement. So there are definitely pockets of strength. And wage growth is still sort of normalizing,

equalizing between unionized fields and public sector occupations and the private sector where wage growth is continuing to slow. Yeah, although again, last month, at least in the BLS numbers, there was a slight improvement in wage growth. But to me, the more important thing,

Julian, the reason why we bring up the employment rate flat as it may be is this concern kind of going to the beverage curve analogy that when the unemployment rate starts to increase, all of a sudden it's going to start to increase quite quickly. And we know when payrolls go negative, that's usually when the recession begins. And so all I'm trying to do is hold on to hope

that we're not headed down that path. And so when I get a job support like this, I go, okay, it wasn't great, but we're not at that moment of accelerating weakness yet. And maybe there's hope that that moment may not come. Well, there's a lot of reason for hope. Real wage growth has been positive for over a year now that is propping up.

consumer spending. Earnings season has been pretty good. Companies are doing well by and large. The issue is that like if you look at the Fed's beige book, if you look at a lot of the softer measures, they're great overall in the economy, but they're not very good when it comes to hiring. Consumer confidence rose, but the unemployment differential actually fell. In the ISM services number, we saw, you know, fairly weak, but still expansionary. figures for services overall, but not on the employment side. On the employment side, we're basically at stagnation. And so the issue is that the labor market is cooling. The beige book was just full of anecdotes this week about companies delaying hiring, pausing hiring,

slowing, hiring because of uncertainty about the future path of rates, basically, of interest rates. It's interesting because the path for interest rates seems a little bit more certain these days right now. Julia Pollack, thank you very much. Always great to see you. We'll see you soon. Good see. All right. When you think fashion, think Amazon, right?

The e-commerce giant has quietly become one of the biggest forces, biggest forces to be reckoned with when it comes to footwear and apparel sales. We're going to dive into that dynamic when power length returns after this break. Welcome back to Power Lunch. Wells Fargo is out with a new research note, stating that Amazon was the top seller of apparel and footwear in 2023 and by a wide margin for more on the impact to the retail space and whether competitors have any chance. Let's bring in the author behind this note. Ike Boracow. He's a managing director at Wells Fargo and senior retail and e-commerce analysts. Ike, you're confirming. Dom was just going on and on about how much the chew. And he's not alone. The stuff that were, it's just convenient. It's cheap. I don't even know if I like it all, but it's there. And in a pinch when you need kids' socks or back to school like I did, they show up and my inertia leads me to just use them instead of going to find better ones. Yeah, I mean, I think you said it. I think you said it pretty succinctly. I mean, they've done a good job to attract sellers by lowering fees, increasing value in shipping speeds to consumers. But I mean, just put this in context, Kelly. It's

pretty, it's pretty jarring when you look at the numbers. The apparel footwear business at Amazon pre-COVID, was run rating about 30 billion by our estimates. Today, that number is closer to 60 billion plus. It's been run rating 20% Kager on a $500 billion market. So remember, the market grows 2% a year. So it's really pretty incredible what they've been able to do over the past couple years for sure. How much of this is the effect that Amazon has for the longest time

been a company that has been a lost leader or a nonprofit generating, because they've kept prices so low, but they've managed to build a customer book, if you will, where everybody just goes initially there to see anything that they want, and they just kind of stick around. I guess what I'm saying is maybe they've done this through a lot of investment in getting people to go to their platform, and not just because of the seller and buyer and marketplace dynamic that they've built as well. Sure. Look, I think there's been a lot of puts and takes. There's been a lot of learning. Remember, some of the things they've done with private label for

example, kind of ramping that up that's been announced that have been pulled back a lot over the past year. So there's been a lot of trials and tribulations here, but at the end of the day, I agree with you. It's kind of, you're going to go on Amazon. You're going to shop. What do I want to throw in my basket? So, you know, when it kind of comes into who's at risk in the softline space, it's really not so much the fashion brands. I still think if you're going to shop for fashion or high-end brands, et cetera, you're not going to buy it on Amazon. The shopping experience is still not exactly fluid to the extent that you want to do that. It's terrible.

It's amazing that it's not better. But it's because it doesn't have to be, right? Nobody even knows the brands. When you buy some of these things, they're not brands, you're even aware of. Of course. And then there's the inertia of returning it. And you think, well, it's sort of the people like me. Like there's a comic who has a whole sketch, which Dom might appreciate about people

who buy their clothes from Costco. He says, once you do that, you've given up. That's how I feel on Amazon. I've given up. I have no time to figure it out. So I just go and see what they have. but I don't even feel thrilled about it, but it's good enough. I think that's right, but think about categories where you would be comfortable

throwing an item in the basket. So a pair of socks, pair of underwear, maybe some baby clothes, a onesie. These are kind of the brands that we cover where there is some risks that you can kind of see that plays into it. So Haynes Brands falls in that basket. Carter's falls in that basket. And I know it's outside of the softline space they're talking about, but beauty is really a big deal as it pertains to our underweight rating on Alta Beauty.

The beauty brands are starting to look for distribution in places we've never thought they would look. Amazon is absolutely there. Look at L'Oreal and Estee Lauder, some of the announcements they've made, making direct shops with Amazon over the past nine plus months. That's important to watch, too. Mike, how important is the Amazon Prime membership dynamic to this whole story? Because when you say, let's just buy a pair of socks or some underwear or a pair of cheap slippers or foam slides or anything like that, it happens because you get one to two day shipping. It's at a price that you think is. ridiculously low and it's from a company that you don't know probably from china or vietnam or somewhere else but prime is the reason why you do it because it's just a convenience factor and it's there

and you pay for it yeah and it's going to push down you know broadly speaking and probably limits or pushes down economics within digital commerce for the brands right it's going to push down free shipping thresholds if not eliminate them it's going to push up uh the the need to be able to deliver items within two days at a minimum maybe something At some point, we're going to probably be in a next day delivery kind of table stakes. But it's going to really hurt the economics for everybody digitally. It's been doing that over the past several years. That's likely going to continue for sure.

More and more. And again, this is the desperation. I find myself clicking, you know, what can come between 2 and 6 p.m. It's so bad. But that's what I'm down to. What are the final takeaways if this trend continues? Who else? I think the beauty category, like you said, super important one where we're seeing weakness.

Where else might it not yet be showing up? There's no categories where we're on the cusp of something, you know, really big happening outside of beauty. I think the apparel thing, this has been going on for a while, like the run rate of what Amazon's done, you know, in the basics and essentials and consumables types of categories, low ticket, on brand. Big thing categories where the brand doesn't really matter to you, a white t-shirt, you know, how much does it matter to you exactly what's on the, what's on the back of that t-shirt? So those are really where the pressure points are. I think that continues. Like I said, outside of beauty, I don't see any big step-ups and change happening anytime soon. But this is going to continue to be a thing that we're going to talk about for years.

All right. Ike, thanks for joining us. Appreciate it. Resonates, I think, with a lot of the back-to-school shoppers this week. Ike Boraciao. We appreciate your time. All right, with the Dow and the S&P on pace for their worst weeks since March of 20203, one so-called protection play investors could turn to in tough times as showing some signs of actually being

overbought itself. Market Navigator has that story coming up next. All right, welcome back to Power Lunch. What we're showing you right now is a market that is just about near the lows of the session right now. The Down Dust Rules is off by about 430 points. It's a 1% decline. The S&P 500 off about 1.3 quarters percent to 5403. You remember we told you that 50-day moving average just yesterday currently still sits at 5505, so 100 points below that now. And the NASDAQ composite at 16,674. It's off about 2.5%. So again, a deepening sell-off that's now lost momentum, and we're floating just off session lows.

Now, market navigator viewers will know that earlier this week, we looked at overbought levels in names like Altria and Philip Morris in that kind of flight to safety consumer staples trade. Now, today, one of our traders is seeing evidence of that crowding, kind of widening out so fast that the institutional investors are starting to go so far as to hedge that downside hedge, so to speak. We're going to dig into it. Mike Coe is our chief strategist with Open Interest Pro. He joins us now. So, Mike, let's talk a little bit about what the options market is telling you about just how much safety demand there is.

Yeah, I mean, obviously we can see that in the performance today. If you take a look at Staples, they're materially outperforming XLP, which is the Staples ETF. We can see that's essentially unchanged today. But as you pointed out, a lot of these Staples names are sort of getting into stretched territory on a relative strength basis. And we did see more than two times the average daily put volume in XLP already today. It's actually traded five times as many puts as calls. And that's largely the result, as you point out, of a large institutional trader trading those puts. Specifically, what they were doing was buying the October 81 puts, bought 2,500 of those, paid about $0.72 a contract, and then sold twice as many of the 77 strike puts at a quarter apiece. It's a net debit of $0.22.

This isn't a massively bearish bet, but what is basically saying is this may have come a little bit too far, too fast and looking for a pullback. And I would make one other quick point. One of the names you didn't mention was Costco. Costco is one of the largest constituents of the Staples ETF. It represents about 14 percent of it. And although some of the staple stocks remain reasonably valued, shall we say, Costco is about as expensive as it has ever been. And it's going to be reporting earnings on the 26th of September. So then how exactly would you go about hedging the hedge? If we know that consumer staples are the way that people have been seeking some of that protection, the less volatile play, maybe even some income on the side with dividends, if that trade has now become stretched, what then do you do for that hedge hedge that is maybe not the institutional level trade that you just spoke about?

Yeah, I mean, so the thing is, staple still remains, I think, a place that's not hugely risky, but I just think that if I was going to be inclined to own it, I'd rather do so at lower levels. I actually made a slight adjustment to that institutional trade, and I was sort of dipping my toe in the water to see where we could get a trade like this off. I actually migrated those strikes down slightly. So I bought the 80 strike puts that expire in October, and then I sold twice as many of the 76 strike puts. I spent about 16 cents per spread to. put that on. So basically, if the staples do pull back, I'd make my peak profits right around that $76 level. Now, the downside, of course, is that potentially if it really blows through

that short strike, I could end up owning the staples. But, you know, at 21 times earnings, which is probably a mean multiple for them, if it does pull back in that 14, 15% neighborhood, which is what we would be talking about, I'd be comfortable owning it there. And then one last point here. If you take a look at this navigator-type theme that we have going on right now? Are there any other signs that you're seeing in the marketplace right now that lend you to believe that we could be due for some material downside, maybe broader and not just outside the realm of Staples? Yeah, I mean, actually, we've been seeing that for a little bit, actually. So if, you know, for those viewers who actually lived through the tech

rack and some other eras where we saw some extended valuations, one of the characteristics of the market that I observed back then and that I saw. started to observe now was usually when the market rises, we expect volatility to fall. But that isn't necessarily true when you start getting towards periods that precede either a correction, a decline of 10 percent or even, I hate to say, bare markets, you know, 20 percent declines or more. What you often see is that volatility rises even as stock prices are rising. And there is, you know, intuitively some reason why that might be true. You can imagine that people get increasingly nervous that maybe things are a little bit extended. And that's what contributes to those sort of

gaps that you see, both up and down, fear of missing out to the upside and concerns that we might have come too far too fast on the downside. And we did see that. We saw Nvidia behaving before this recent decline, a lot like Cisco did, actually, in 99 and early 2000. So I think there are a number of other parallels. All right. Mike Coe with hedging the hedge trade. Thank you very much. Have a nice weekend. We'll see you soon. All right, well, the NFL season is kicking off with the bang last night that we saw Kansas City outlasting the Baltimore Ravens in primetime last night. And coming up, we're going to highlight the league's biggest ever push into streaming.

We'll have that story. We'll be right back. All right, welcome back to Power Lunch. After last night's big thriller, the NFL's opening weekend is continuing again tonight. As you can see there, the Green Bay Packers facing the Philadelphia Eagles in Sao Paulo, Brazil, only streaming on Peacock, yes, owned by this network and its parent company. The game is part of the NFL's global expansion plans, as Roger Goodell explained when he joined Squawk Box this morning from Brazil.

We have 38 million fans here already. We hope this will really ignite this market and really become passionate of football fans. And we're obviously continuing our games in Europe. We're continuing games in the UK as we're going to Spain next year. We'll be in Germany this year. We'll be hopefully back to Mexico next year. So we really believe playing the games is a big part of making our game global. Commissioner Goodell, racking up the frequent flyer miles there.

CNBC unveiled our official NFL franchise values, which you can check right now on CNBC.com slash sport. And people saw $11 billion for the Dallas Cowboys and thought, how can it possibly go any higher for a franchise in the NFL? And is international the answer behind that question? The man behind those rankings, Michael Zanian, joins us now to discuss this further. And I remember when you put out those numbers, people said nobody had ever seen a value over $10 billion for anything. And then they link it to the idea that maybe private equity ownership was going to be a bigger part in the future. And then you say to yourself, maybe private equity ownership has to be there in order for valuations to keep going the way that they are.

Yes or no? Absolutely, because what you're going to see with private equity, number one is when these teams are sold, private equity is going to fill a big gap in terms of the limited partnership equity that comes into it, which really at these valuations is going to be in excess of $3 billion. So a private equity check of $500 million or so will certainly go a long way in that. I think a second way is going to be with new stadiums or renovated stadiums that will help teams with that fund those renovations. And then a lot of these private equity guys already have a lot of experience with sports teams, sports leagues, sports media, streaming. So as the NFL continues to push itself internationally, I think these relationships are going to help the league do that. I mean, I think it's liquidity as well, right? If you have a dynamic where you can mark prices at a faster rate, now relatively, it's not like a stock market, right?

But if you can mark them at a more periodic rate, then all of a sudden you have a more. transparent valuation for any franchise. Right, no, absolutely. It's liquidity plus the brain power. I think that's going to both help the NFL. I mean, I know, I say, I don't know if you agree with it, but I really think retail is where this is ultimately going. Now, it might take 10 or 15 years or maybe less,

but at some point you need to keep going to bigger and bigger pools of capital. And once you exhaust private equity and that, as long as the income is still there, as long as ticketing is we talked about it, is still there, as long as the TV piece of it is still there, then, you know, retail becomes the next audience ultimately. A lot of people are saying that. People are saying that. I think that may happen, but I think that's a long way down the road because right now we're only talking 10% stake allowed by private equity.

Other leagues allow up to 30%. So I think you're going to have a slow walk up to that 30% before you get to the retail side. But then there's something between that and also the Packers and the Green Bay franchise model where you have the fans. They're already there. They're already kind of there, right? Non-profit. So where is in the spectrum are we right now? Exactly.

Where are the Packers worth in that whole? They're sort of mid-range. I think it was about $6.3 billion. But that's great, considering there's such a tiny market, but a passionate fan base. They've done a few stock offerings. Now, you don't get a dividend. You know, you have no saying how the teams run. But they've used that money to help renovate their stadium, Landbo Field.

That's interesting and innovative approach. Maybe a glimpse of what else could be coming down the pike. Mike, thanks. Thank you. Appreciate it, Mike Ozaney. And the other big new revenue stream the NFL is looking to tap into is, of course, streaming. As you speak, Julia, of whether the gravy train can continue, this is perhaps the most important part. Well, Kelly, the NFL is following its fans onto new platforms. Legal Be streaming on a

range of apps this fall, and those apps are deploying new technology to keep fans engaged. Peacock's exclusive game tonight and simulcast of 22 regular season games comes after last year's exclusive wildcard game was the most streamed event ever. Streaming also brings in technologies that I think are going to be really valuable to improve the experience for consumers. I think, you know, there's more things that they can do with their platforms and technology that I think is going to be very, very positive with our fans. Amazon with its third season of Thursday night NFL games is expanding its use of AI-powered tools to predict pivotal moments like its defensive alerts, which tracks the movements of defensive players. Now, this comes as Netflix is getting ready to air its first ever NFL games on Christmas Day,

building on the popularity of its documentaries on NFL players and cheerleaders. So the question now is whether NFL ratings will continue to rise after growing 7% last season. Now, last year, 94 of the top 100 shows were NFL games. But ratings tend to dip in election years and ratings will face tougher comparisons. against last year when ABC simulcast all ESPN games due to a shortage of scripted shows because of those Hollywood strikes. Kelly? That's right. Julia, thanks. We appreciate it. Well, I mean, I'll just leave it at that, but I think that the question about the dollars that could be coming in from the streaming business remains the biggest excitement and a potential worry piece.

Anyway, thank you, Julia. We appreciate it. All right. Let's get over to Pippa Stevens for a CNBC News update. Good afternoon, Pippa. Hey Dom, Israel's military says it is looking into reports of the death of a Turkish-American woman shot and killed during a protest in the occupied West Bank. Military officials say troops fire toward a male who was throwing rocks at soldiers. They say they are now looking into whether the woman was killed as a result of that gunfire. The White House says it was deeply disturbed by her death and called for an investigation. RFK Jr. won a court battle today that is delaying the mailing of North Carolina's absentee,

ballots. The independent candidate who suspended his campaign late last month won an appeal over having his name removed from the presidential ticket. Kennedy sought to remove himself as an option in the state to help former President Donald Trump, who he has endorsed. And Rome is considering charging tourists to make a wish at the iconic Trevi fountain. City officials say they're weighing a two euro or $2.25 ticket to access the open air fountain, which has always been free of charge. They say it will help safeguard the 262 year old destination. Romans will not be charged to enter. You know, Kelly, I feel like that's the European equivalent of the tipping phenomenon in the U.S. It's a tourist tax. A tourist. I mean, it's very, very busy. I could see an argument for,

you know, spacing things out a little bit, but we'll see. Pippa thanks. Join CNBC and Boardrooms Game Plan Conference on September 10th in L.A. It's a high-powered event bringing athletes, owners, investors, and innovators to explore the intersection of business, sports, music, and entertainment. Just scan that QR code or visit cnbc events.com slash game plan to register, and Power Lunch. We'll be right back. Welcome back to Power Lunch. The NASDAQ selling off 2.5% today as Broadcom earnings, not the earnings themselves last night, but the guidance disappointed, and it's taking down the chip space more broadly. As you can see, the SMH semi-ETF is down 12% this week. The NASDAQ, for its part, is down nearly 6% this week, and making it the worst

performing of the major averages. And there you can see also the rough start that we've had to both September and August for the SMH semi-ETF. A similar 12% decline in both cases, in fact. Let's bring in Sima Modi for more. Cima. Kelly, as you just pointed out, widespread weakness across the semi-sector. And Broadcom, yes, is leading the decline now down about 10%. So we're at session lows.

Earnings beat, but it's AI revenue projections for this year failed to meet the most bullish forecast out across Wall Street. Melius analysts think the AI revenue lacked upside because custom silicon revenues likely into Google fell in third quarter as meta and ByteDance are still ramping. Remember, this is a company that is helping Big Tech

build out their own in-house chips that at some point could rival Nvidia. Separately, rumors continue to fly around how Intel is going to restructure its business, whether it's selling down its stake in MobileI or a report today suggesting Qualcomm is looking to buy its design business. Intel spokesperson

telling us that companies deeply committed to this business, including its market-leading position in the AIPC category. Let's look at Nvidia among the decliners today and now down about 23% from its recent high. Investors counting down to CEO Jensen Wong and his talk at Goldman Sachs conference next Wednesday. We will also hear from AMD CEO on Monday. So the timing is really perfect here. Investors, of course, are hoping to get more clarity on future growth, the demand they're seeing from hyperscalers, not just next year, but in 2026 and beyond, guys.

I just think, you know, it tells you how I, as Stephanie Link said at the top of the hour, she said she'll be lagging into her position on Broadcom next week, but that it's not that the earnings themselves are problematic. And she said it wasn't even the AI component of the business that disappointed. But again, when the outlook, when it's not a beaten raise and that's what the market is primed for, this is the reaction you get. It's interesting because, you know, historically, Broadcom is not one of those companies in the semi-sector that delivers a beat on raise. But unlike Nvidia, which of course is now the market has gotten accustomed to that. We'll see how quickly investors will pounce on this opportunity to buy on weakness. I would point out we haven't seen any major price cuts. In fact, JPM Morgan is raising their price target on Broadcom from 200 to, I think, 220 a share.

They're maintaining their overweight ratings. So I think that does tell you something, Kelly and Don, that the fact that you're not seeing such a strong reaction from Wall Street, no downgrades thus far. What's interesting about the Broadcom results as well, Seema, was the notion that they are going to have record AI related revenues coming up in the coming months, but that the focus may have been on some of the weaker parts, relatively speaking, of their non-AI businesses. And how much does that play into the story for Broadcom versus names like Nvidia? Yeah, and CEO, Hock Tan, really tried to defend the company's non-AI business on the earnings call, Dom, talking about how we've hit a bottom. We're seeing a recovery in the non-AI business, which includes storage, enterprise, some of the non-sexy AI stuff, where Broadcom is a leader. So, of course, very important.

But that's where actually analysts, you know, as they've been putting together their notes this morning, have been a bit more bullish. They think those businesses over time can recover as we start to see those AI numbers, maybe plateau at some point. All right. Sima Modi with the state of play on chips. Thank you very much for that. Coming up on this show, we're going to get the trade on Broadcom in three-stock lunch as well. The S&P 500 is headed for its worst week since March of 2023 at this stage. We'll be right back after this.

We're hovering just near the worst levels of the day so far, and as stocks continue to sell off, it's time for today's three-stock lunch. So here with our trades is Sylvia Jablonsky, the co-founder and CEO of Defiance ETS. Now, first up, Sylvia, it's got to be Broadcom. I hate to do this to you, but it's a story. It's a big one. The stock is a big loser today. It's taking a tumble along with the rest of the entire market.

the chipmaker reporting lack less, well, I shouldn't say that. They actually reported good third quarter results. They blew past expectations, but gave somewhat muted guidance. The stock is now on pace for its largest percentage decrease since March of 2020. That was during the depths of the virus pandemic. Sylvia, what's the trade on, I'm going to say Avago, because that's what the ticker is, Kelly. Hi, Dom. Well, I think that, you know, biggest, the word biggest loser was used.

I think today's biggest loser is going to be tomorrow's biggest winner. This for me is an emphatic buy on the dip. I love this stock. I think that they're one of the best chip providers out there. So you need broadcom chips for any kind of complex infrastructure, data center development. They're part of 5G, 6G, the wireless side of things. Their biggest clients are Apple, Google. You know, they touch all of the Mag 7 names.

Earnings were very good. I think, you know, you talked about it in the last segment. I think the market just is expecting a little bit too much. And there's this, you know, overzealous need for future outlooks that are, you know, kind of higher and higher. But I think what we're seeing here is it's slow and steady. The AI race continues. And these solid stocks are going to continue performing. So I love the same amount of pullback.

We even launched a levered ETF on it. There's just so much demand for this and bullish outlook for outgo. Well, I was excited until you told me about the levered ETF. And now I'm thinking maybe there's still too much euphoria. Speaking of solid names, though, Sylvia, let's talk about 3M. Morgan Stanley just initiated coverage with an underweight. and $125 price target. It's about $3 below where we are now.

It's rallied 30% over the past three months. And a lot of talk about the new leadership and so on and so forth. Why do you think this one's an attractive name? So I like this name. I like it for a longer-term hold. I think Broadcom will play out a little bit sooner. But if you, you know,

if you're looking for a stock that's on sale that can play out in the future, they've had kind of a rough four to five years. They haven't done a whole lot. Over the last year, it's about 50% of performance. You know, they've settled their lawsuits. They cut their dividends that they have some efficiency and cash flow. And now they're investing in parts of the market that makes sense.

So climate tech, you know, in the industrial robotics part of the market, kind of the AI trade and data centers instead of, you know, some of the businesses that they were in before that were profitable. And so with a new CEO, it takes time to kind of clean up shop, but they do still pay a 2% dividend, $400 million buyback. And I think they're starting to perform and they're on their way to making changes going in the right direction. So I think it's like a two to three year old for me, though, versus again, Broadcom being more short-term play out.

All right. It's a blue chip name as well, so it's not unheard of. Finally, Sylvia, let's talk about Bolero, a bright spot in today's market sell-off. Those shares are higher after the bowling alley chain companies revenue for the fourth quarter top Wall Street expectations. What's the trade on Bolero and how much more am I going to be bowling in the coming months? Yeah, I mean, I hate to say this because it's such. It's just such a fun company, right? Who doesn't like bowling?

And I think they go at it in a unique way. You know, it's kind of like the higher class, you know, entertainment type of bullying. They have a media vibe to what they're doing. 300 locations globally, a lot of M&A activity. But I think, you know, they've done quite well, but they are slowing. So if you look at revenues, we have about 12.5%, which is good, but slower than it has been for the last three years. Their growth outlook is about 6% or so overall.

That's lower than it has been. margins are lower than they have been. And I just can't get excited about, you know, hyperbolic growth potentially happening in the bowling industry. So great company, they're leaders in their niche, but not a buyer here. All right, Sylvia, before we let you go, I'd also like to get some commentary on the broad market sell-off right now. You are somebody who watches a lot of ETF flows, mutual fund flows, that sort of thing. What are those flows telling you about just how deep a potential pullback could be in this environment? I mean, if I can, you know, reference

our own flows over the last couple of days, we've seen a lot of flows into super microcom into micro strategy. And so that tells me that investors are, you know, buying on the dips here. They think that perhaps that the market will recover. It's an election year. We have a couple of months to go. September is seasonably terrible. We got this slightly weaker jobs information, but the Fed is on their way to cut. And we have, for all intents and purposes, seen a soft landing here. Corporate earnings are great. 90% of S&P 500 had increased EPS. I think that I think, you know, two to three percent GDP, double-digit growth. We're in a good spot for recovery into year end.

I think it's going to be volatility's part for the course at this time of year. Okay. Sylvie Javlonski, thank you very much for that. We'll see you soon. Thank you. All right. We'll be back after this break. Let's give you a quick check on the market.

As you can see by that graphic there and for those listening on Sirius XM right now, we're just down about 380 points. I want to say we were down maybe 440 at the lows of the session, Kelly. but it's very, very clear that the amount of red that you're seeing on the chart right now and just how deep it is. We are bouncing off the lows of the session. We're off one full percent on the Dow at least. The NASDAQ is going to be the big one.

And of course, the big stock story, as we've been talking about, is on the chip side of things. They're getting whacked hard today. The SMHETF is down roughly 4% following Broadcom's results, 12% down this week. You've got names like Invidia and Marvell, ASM holding, and K. LA Corp, all down 3% or more as well. And NVIDIA has been sinking since its earnings report. It's now nearly 30% off of its recent high. So, yep, a huge recent. Can we talk about the fact that you're wearing Packers colors? Is that a subconscious thing? I don't even know when they play, but go back. Tonight. Okay. Oh, that's right. On NBC. All right. Well, thanks very much

for watching Power Lunch.