Transcripts For CNBC Power Lunch 20240712

Its competitor, nikola the Airlines Holding up after Morgan Stanleys bullish call on the group. The analyst will join us kelly, first over to you major aver raages are hitting their lowest levels. Bob has a look at the stocks making the biggest move today. Bob, lets start with you. Were in a 40point trading range. Were about to break out on the upside i know this sounds crazy lets look at the sectors and whats moving. Were not getting a lot of help from technology. It rallied early yiier but hasnt been moving as forward were getting nice moves from the industrial and Health Care Stocks these stocks rallied earlier off of their lows. Apple was 119 earlier. Its not moving the market forward here in the middle of the afternoon. Still off of their lows. Same with microsoft, nvidia, lam and some of the work from home stocks they were lower earlier but not rallying dramatically. All of them down wayfair was briefly positive slack has turned positive. The stocks are all off their lows most of them down 2 or 3 . Nasdaq barely avoided a 10 correction earlier in the morning. Value is down also on the month. Not as much. I wouldnt call that a dramatic rotation low volatile stuff the stuff that people go to defensively. They are not doing much either they are all done 1 to 2 as well its not like were rotating into some fantastic low volatility the bottom line is this is take douc takedown of the hightech stocks how much further can tech tumble from here and what does it mean for the market if it does you say you dont see tech falling much further from here why do you say that and which kinds of tech stocks are the most vulnerable here are they the big blue chip ones or the sort of more fashionable ones yeah, obviously things can go further south but we do believe that when were looking at some of the more technical indicators we were very much in an over bought condition with some of the Largest Tech Companies that this pull back were really watching is whether or not we can hold the 50day moving average because it is approximately indicate a type of correction retail flows or even to ctas or trend following strategies that were looking for that over extension and some reversal. Maybe we get to a point with the 50day moving average and the 10 correction that we would find some decent support thats what were on watch for longer term, were looking at more rotating out of tech and have been looking more at value, small cap and more of the cyclical what we call the reopening plays for the economy. The market or nasdaq is down about or maybe more from where how much further do you think it might grind lore wer oi you think you might. Its a lot to worry about. Its waning fiscal stimulus, high unemployment, rising layoffs, job losses becomiing more permanent against that long list there is a slew of positive developments liquidity is ample. Businesses are roping. Economic and labor markets are gradually healing. Therpds quarter gdp is projected to be 30 . Its hard to see a recession or a prolonged bear market against that backdrop. Test cloily correlated here. It seems an awful lot was multiple expansion. With a high uncertainty the future had the potential to be very different than the present. It turned out to be much better than the present was at any single point of time that explains the divergence the recovery were seeing in Economic Indicators is what the market was focused on. It was motivated by fundamentals more than anything else. What kind of investments should i make today for profit and protection over the next six months to a year what stocks or ere other investments. Be patient and be diversified which are the two cardinal rules of successful long term investing. The way were positioning is to try to balance the risks as far as we do believe that people have been very hesitant to embrace this economic recovery has legs it seems like because most economists are epidemiologists people dont want to stick their neck out they are looking for the next shoe to drop, the flexion dip. To do it in a prunts way, look for where is the head room for us thats more on the cyclical place more going down the capitalization spectrum. Went over into more value orientation and making sure its a globally diversified portfolio. I might sound boring but boring can be good. General motors announcing its taemg up with nikola. Phil has the details for us. You miergt sght say a week a was up around 500 a share its fallen below the 50day moving average its not now its down at 346 its market cap down about 143 billion. Theres the other news that people are digesting when it comes to electric vehicles its the partnership or getting together, if you will between General Motors this is a deal that they struck over the weekend it gets more size an scale for its ev platform. Nikola gains access and yes, it has vast expertise when it comes to developing electric vehicles. We do not want to make our own truck lines. This is what gm is so good at. Its going to be built at their plant. We get access to their entire supply chain the team thats built the best programs in the world. Thats how much it expects the benefit because of this deal it expects to save approximately 4 billion since it wont have to spend as much developing battery technology, getting production up to speed and investing billions into building a manufacturing plant. Phil, the shares of both company, gm shares are higher today on this announcement what does this mean for the story line from a couple of weeks ago about gm spinning off its ev business . The ev infrastructure its collected and built up the question is how do you access that . This deal is one way so say we need more size and scale we need more auto makers to say we want that technology. Will they get other start ups, other auto makers who say we want the technology. Thats a possibility as well the spin off is still a possibility. Thank you we appreciate it coming up, an airlines bright spot in todays trade after Morgan Stanley says buy these four names well have analyst behind the call and despite the markets turmoil today the billionaire tilman is starting the see some bright spots in the economic turn around. He will join us later this hour. Well talk to him about that and tonights rockets lakers tilt. Well be right back. What do you look for when i want free access to research. Yep, td ameritrades got that. Free access to every platform. Mhm, yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. Now offering zero commissions on online trades. We charge you less so you have more to invest. Welcome back airlines are soaring on back of Morgan Stanleys initiation. The firm believes airlines with high domestic leisure exposure with strong loyalty will see demand come back first it expects the see Airline Travel back at precovid levels as early as 2021 joining us is the analyst behind the calls. Hes the Equity Analyst at Morgan Stanley its good to have you, ravi. Lets start with who this doesnt include which is the airlines more geared towards business travel. What happens to them thanks for having me. I think as the covid case count improves and as we get closer to a vaccine, we think it looks relatively close to normal within a couple of years first of all, i think thats a sooner time line than most people expect. I think consensus is looking for 2024 in terms of normalization i think leisure comes back first. I think u. S. Domestic comes back first. I think international and business will catch up we think based on everything we see in terms of v shape, macro rebound, we think asm and rpms which is air traffic demand and volumes will come back to 2019 levels exiting 2021 and early 2022 thats a combination of leisure and business tell me, for example, about American Airlines where we have talked a lot about the debt levels they will have coming through this pandemic even if demand brought prospects brighten, will they be able to service that debt load we dont cover American Airlines today but we think that across the space, i think we are worst of the liquidity concerns. Daily cash burn levels are under control and likely to improve with the incremental cost action that these airlines are taking the dried powder still have on the balance sheet. I think the only thing that really matters is the space in the near term is what does Airline Traffic look like and if we keep getting incremental data point, i think it will be a rising tide for the entire space. Lets go back to your favorite names how much upside do you think that can have and for the industry, does it need to go through more transformational change in order to cope with this pandemic or is your case that business may come back before much more drastic measures have to been taken . Our base case now is we get an extension of the c. A. R. E. S. Act. You have the status quo through april of next year and if it does look like a lot of the traffic is coming back by then, you probably end up with an industry that sees incrementa welcomes improvements on the cost side but doesnt have to massively chop and chak or fundamentally change their Business Model to survive this pandemic on the other hand if we dont get c. A. R. E. S. Act then youll see more near term actions at the end of the day we think that airlines that have large u. S. Domestic exposure, Strong Customer loyalty and are kind of have pretty aggressive fair points they will probably see demand come back first thanks for joining us we appreciate it sure. Coming up, stocks under Pressure Tech and Energy Leading the declines this day in the s p 500 as oil goes down about 8 . Well have more on those moves every single one of the 11 sectors in the red shares of slack bucking the trend. They are up 2 as the work from home play gets ready to report earnings after the bell. We will have those details as more power lunch comes right your way after this. We made usaa insurance for veterans like liz and mike. An army family who is always at the ready. So when they got a little surprise. Two . They didnt panic. They got a bigger car for their soontobebigger family. After shopping around for insurance, they called usaa who helped find the right coverage for them and even some muchneeded savings. That was the easy part. Usaa insurance is made the way liz and mike need it easy. A lot goes through your mind. How long will this last . Am i prepared for this . Are we prepared for this . With fidelity wealth management, your dedicated adviser can give you straightforward advice and tailored recommendations, with access to taxsmart Investment Strategies designed to help you keep more of what youve earned so youll know youre doing what you can for your family and your future. Thats the clarity you get with fidelity wealth management. Come on in, were open. All we do is hand you the bag. Simple. Done. We adapt and we change. You know, you just figure it out. Weve just been finding a way to keep on pushing. Welcome back stocks are in sell off mode for the past three days after staging the massive rally. Its all time highs. Analysts were caught in a game of price target catch up eric has that story. Thats right. The big tech sell off cut many wall street analysts flat footed many raised their price targets in the last two weeks. Amazon, apple, netflix and tesla, some of the boldface names that saw increased bull h bullishness from the sell side many of those names are down double digits since we hit the nasdaq name six days ago its reiterated that 130 number on august 28th today apple is sitting down at 116 since the high jeffreys on august 26th more than doubles its price target on tesla up to 500 on a split adjusted basis they did cross over 500 last week before tumbling back down wells fargo riding the nvidia band wagon raising its price target on august 14th to 510. Those late august upgrades look smart for a few days but the past week has more than wiped out a lot of those gains for now. Kelly, back over the you thank you lets get over to seema for trading nation kelly, hello. One stock has not gotten quite as much love from wall street. Its slack the last price target increase was all the way back in july even as the stock has rallied nearly 100 off its march low. Reporting earnings at the bell analysts expecting a 44 sales growth in its recent quarter lets check on the stock ahead oif of its release whats the number one thing you want to hear from management today when the Company Reports earnings i love this companys potential. I do think its cheap relative to its work from home peers. What i want to hear is i want to see how they are doing when it comes the signing up some of their big enterprise customers they signed up amazon, verizon that makes them less vulnerable to the churn that they might experience from having too many Small Business clients i would say the number one thing that i want to see or hear is how well they doing with the bigger customers they are average revenue is trending up which is a big positive thats what im looking to hear. Lets bring in todd gordon. The fact that slack is up 2 on a a down day, what does that tell you as to where investors are placing their bets yeah, slack, earnings tonight, we look at last quarter and the technical reaction the revenues are up 50 last quarter. The quarterly growth only mass the stock looks vulnerable heading into earnings tonight. Anything below 28, we have to say its broken. Lower prices are possible. We dont own it. Were not looking to own it. We have enough exposure in the work at home, stay home environment. We feel the stock is pretty fully valued 18 times next years earnings and Business Model is too easily replicated by Microsoft Teams or googles product. Got it. The stock at 29. 75 thanks for joining us today. Check out our website or follow us on twitter. Back to you. Thank you very much ahead, crude oil is getting crushed today. Its down more than 8 the xle and thats the s p energy etf down for six Straight Days well tell you more about that its time for our weekly check in on the state of the economy with tilman. Why hes feeling a bit more positive despite the uncertainty. He joins us next you can go your own way go your own way your wireless. Your rules. Only Xfinity Mobile lets you choose shared data, unlimited or a mix of each. And switch anytime so you only pay for the data you need. Switch and save 400 a year on your wireless bill. Plus, get 400 off when you buy the new Samsung Galaxy note20 ultra 5g. Welcome back here is your cnbc news update. Georgias secretary of state announcing nearly 1,000 cases of possible double voting in two elections this year. In part due to a surge in mail in ballots a state democratic official says voter fraud has been rare in georgia. Goet are calling for a secure voting process this November Walmart offering flu shots at more than 4700 pharmacies nationwide and offering appointments cvs, wall scregreens and otherse announced the availability of the flu vaccine. It was not the first day of school for hartford, Connecticut Public schools a ransom ware attack knocked us schedules. They hope to begin School Tomorrow for its 18,000 students youre up to date. Thats the news update back the you nasdaq still the worsterer former of the bunch. Same for the s p 500 now crude is getting crushed thats what makes it different than last week we have seen the selling pressure extend for several sessions now lets go to dom. Its a notable distinction. We didnt see a lot of stresses in other parts of the market given this tech related sell off. Were seeing it emanate throughout the crude complex off almost 8 . 39. 82 for ice brent crude futures. If you take a look as we drill down into some of those energy marks, look at this. This is wti crude. The negative prices we saw related to covid we have seen a nice move higher since then but we have been locked in a pretty tight range for now. Well see if this move breaks to the down side. L scare in the crude markets now. Check out whats happening individually across certain parts of the package the biggest decliners there. Chevron and the oil major side down 3 . Phillips 66 was an out performer. Its only down about half a percent. Remember to put it all in context. Exxon mobile, oil major in the United States over the could you rephrase the last year has seen some share price volatility. We had gained about 80 here at one point from the covid19 lows now were down another 30 at this stage well watch to see if the prices for exxon mobile and the other big oil related Companies Start to move higher or lower given whats happening right now ill send things back over the you. You look at the one year performance down by half for exxon mobile markets continue their decline, the economy is starting to tell a slightly different story. Restaurant owner tilman says despite the uncertainty, the Holiday Weekend brought in business and things are looking a bit more positive. Will this momentum build as we head into the fall you saw some brighter signs but still new york city is shut. Business is picking up. Its going to be interesting we have seen unemployment is down 8. 4 . The sign i enjoyed seeing the most was Airline Traffic on friday was 50 of what it was the same day before labor day a year ago so many people went and flew on an airline this weekend. Youll see a lot over the next couple of weeks. Business starts to pick up a little bit right now were definitely in an upswing. Vegas on weekends now. Were doing 50 of what we used to do which is improved a bunch. Regional casinos are still doing very well. We had a good spike this weekend in Atlantic City now that you can have a glass of water and you can eat in the casinos then there is new york city. Its still closed. Mayor de blasio and Governor Cuomo are nowhere to be found. A group of restauranteurs have gathered together and taking the governor and the mayor to court over this prolonged shutdown here. I think back to memorial day which was a day many point to as a time when the gatherings happened and it sparked an up tick in some of the states where the illness had not been seen before we probably have more social distancing awareness and mask wearing awareness. It will be interesting to see what happens two and three weeks from now as schools go back into session we come off the last big party Holiday Weekend of the summer. Well see what happens there are you worried about that and you concerned about what happens when the weather starts to turn and it becomes a little bit more difficult to have out door dining 100 . Well see a lot over next ten days to see if theres a spike from everybody getting together over Labor Day Weekend and then the fact that the world is changed. When im interested to see is business continue now as it gets cold and also remember were doing business all over the country now. The only place were not doing business is in manhattan and new york city. Everybody else, theyre not recovered at all youre still running 10 down, 30 down, 40 down in new york city, youre running 80 and 90 or 100 down because youre not even open we talk about the stimulus and ppp, we dont need anymore ive talked to a lot of people im going to upset a lot of people by saying that but Good Business people now can survive everywhere but manhattan if they run their business properly. Im not just talking to myself im talking to lots of Business People out there that operate one restaurant, two restaurant, little retail. Everybodys dauling for more ppp. Why is it the governments responsibility to support the state of new york. The state of new york needs to issue ppp to all the restaurants and retail that they wont let open its not a government, United States of america problem anymore. Its a new york city problem new york, the state, needs to step up and take care of these they say we have no money were already hemorrhaging thats their problem. Let them find way to solve their problem. Its really just their city. Most of the state is open. Its manhattan itself. They are letting a billion people now ride the subway and get in there together but you wont let a restaurant open and say, youre at 25 occupancy this lawsuit, they will win and they will prevail in this lawsuit. The problem is when the is the outcome of it. Tilman, i want to you about houston on kind of a related note theres place where you experienced a spike way later than what we experienced we came out of ours, it looks like youre coming out of yours as well. Im curious if you can tell us a bit about whats happening on the ground there and are people able to go to restaurants and get an indoor haircut and go to retail shops is there differences between how the city handled its restrictions relative to what we experienced in northeast my big hotel in the galleria area which is a super High End Hotel was packed this weekend. Its people from the east coast and these cities that people wanted to get away we had a spike in houston. We never got above level two out of five levels the hospitals now and the icu unit nous are operating totally at normal. Yes, we did have a little spike and we pulled back something but if you come to houston in the last 30 to 45 days, you dont know, its normal out there. Do you maybe go into a restaurant and see a few open table . Yes. You can only operate at a certain percentage this is a noral place to live. De blasio and cuomo need to live by that. Were going down we had a little spike. We made an adjustment and went backwards in occupancy they wont even try it in new york city. Dont tell me its not political. Why else would they be doing it and say its Donald Trumps fault and this administrations fault. This is a about no politics to me im just look at the hard core facts, why are you not open . We would love to have the mayor or Governor Join us to talk about manhattan and the bureaus of new york. As you point out, you can go outside of new york city, as i did this past weekend into Suffolk County and those restaurants are operating at 50 capacity with indoor dining. Most people this time of year people want to eat outside the point is, they do have some capacity inside to dine. Whats happening in lake charles which you spoke about so touchingly, i would say last week lake charles is in its a resilient city these are great louisiana people its right on the texas border they have a great administration, great sheriff, great mayor, good governor they just need help. They need diapers, water, ses essentials no corporate over head all these, the city is set up and the state is set up. People have got to help these people in louisiana. People have nowhere to live. Almost every single house was demolished its sad story its not getting the help. Great city, great leadership they are americans and they need help big game tonight. The game saturday night was very exciting the rockets came back very forcefully there in the second half it seemed like they ran out of steam but they moved the ball beautifully and hit a lot of three point shots. What are you looking for tonight . I think it will be great game l. A. Made adjustments our speed like lebron said they would. Now tonight well make adjustments to them. Its really funny, you get down to the end of the game they got up by 21. Ke come back and take a fivepoint lead. It all comes down to who hits a few three pointers at the end of the game we missed a couple i think thats what it will be again. Its in the last six month minutes. It sure is. Well be watching tonight. Good luck with that and everything else. Thank you nice to hear a bit more optimistic side of tilman the last few days. Still ahead, stocks are heading back to low offense the day as heavy selling is regripping the market and one key cig untsignal shows theresl pain ahead plus look at some of the names bucking the trend and moving higher today. More pow lchn o. Erun itw welcome back lets get to todays bullish edition of power movers. There are some specific names really climbing today. Peleton is one of them the Company Announced a cheaper version of its treadmill and launched a more expensive version. It will lower the cost of the original bike model by 350. Peleton is up 11 . Its under 90 a share beyond meat inked a deal to open a new Production Facility near shanghai beyond meat trading up to 133 toda bio end tell ch is higher the shares rallying today as well ty still ahead, we will take a look at the one man who may have helped fuel the market rally just before this mass i sell off. Well talk details on ftso banks bullish tech bet, next. What if you could have the perspective to see more . At Morgan Stanley, a global collective of thought leaders offers investors a broader view. We see companies protecting the bottom line by putting people first. We see a bright future, still hungry for the ingenuity of those ready for the next challenge. Today, we are translating decades of experience into strategies for the road ahead. We are Morgan Stanley. Welcome back one of flag s p 500 is now at session lows its down 2. 5 we saw sharp selling pressure this morning that moderated midafternoon but is now picking up once again. The dow is down about 575 poipts the nasdaq is down about 412 thats a 3. 5 drop thats putting us closer to lows of 470 earlier this morning. Less than 90 minutes to go well keep a close eye on all of it the recent run up in technology and momentum stocks was largely attributed to a surge in retail trading. The massive rally did have some help from a giant bet from soft bank we are joined with the details and the fall out hedid flag a ship in soft Bank Strategy in august but the scope of the scope may have caught some investors off guard the filings show as of jaune 30th, they built up the tech momentum names in amazon to microsoft to shopify and transactions to hedge risk 4 billion in options tied to 50 billion worth of individual tech stocks. And in that way, guys, were seeing soft bank act less like a vc with a 300year vision, more like a hedge fund looking for quicker gains key question is how much soft bank still holds or has unwound and whether its shift in strategy will lead to more transparency. They declined to comment when i asked if they could share anything relating to the current equity position. Investors, they are getting jittery. This week in tokyo, soft bank shares, tyler tlslid nearly 10 , erasing billions of dollars in market value lets talk more about soft bank it and ma son had a rough go with the biggest bets like uber and we work. He looked to be scaling back ris thk year but he was making big bets in equities should shareholders his partners in business be worried tyler, i think thats a really good question we did see jitters so far this week in tokyo while we still dont know the extent. I he mean softbank could be sitting on some very big gains due to the bets. However, you know, i reached out to Elliott Management right after this investor that took a significant stake in softbank last year and really push for more transparency. You know, better management when it came particularly to the vision fund. And i think thats at the core of this is transparency. We still dont know the extent of softbanks bets that will eventually come out in sec filings. But this change instrategy while it was telegraphed to investors earlier in august, the extent of it wasnt. You have to wonder if elliott and other big investors are going to demand more transparency from the company. Absolutely. It is a most opaque company. Thank you. Quick programming note to tell you about tonight on cnbc, we hope youll tune in for a special program called path forward race and opportunity in america. Jo jon fortt will take a look at underrepresentation of black leaders in Corporate America and hear ideas and potential solutions from ceos, investors and entrepreneurs including xeroxs ceo and time warners ceo and former aetna ceo ron williams that is tonight, 7 00 p. M. Right here on cnbc and the nasdaq is having worst three days since march a key indicator is signaling there could be more pressure ahead for stocks well tell what you that is next you can always watch or listen live on the go on the cnbc app come on in, were open. All we do is hand you the bag. Simple. Done. We adapt and we change. You know, you just figure it out. Weve just been finding a way to keep on pushing. [ engine rumbling ] [ beeping ] [ engine revs ] uh, you know theres a 30minute limit, right . Tell that to the rain. [ beeping ] for those who were born to ride, theres progressive. A lot goes through your mind. How long will this last . Am i prepared for this . Are we prepared for this . With fidelity wealth management, your dedicated adviser can give you straightforward advice and tailored recommendations, with access to taxsmart Investment Strategies designed to help you keep more of what youve earned so youll know youre doing what you can for your family and your future. Thats the clarity you get with fidelity wealth management. Very tough words from tim Cooks Company apple saying epics lawsuit is nothing more than a basic disagreement over money. Epic portrays itself as a robin hood, in reality is a multibillion dollar enterprise that simply wants to pay nothing for the tremendous value it derives from the app store to that point, apple is saying that epic earned over 600 million from the app store remember this fight started in august epic published that version of fortnight to the app store that allowed fans to make in app purchases. Instead of using apples in app purchase system, apple says, listen, it would let fortnight back into the store if epic removed that payment feature epic has not clearly been willing do that so this fight continues. Back to you. Josh, thank you we should check on whats going on with shares of apple and the whole market right now pretty much back to session lows you can see it hund mbehind me. Dow is down 600 points the s p 500 is down 413 or 3. 6 . Apple is moving lower as this selling pressure intensifies our next guest has three charts that every investor should be watching g to have you here. Lets start with the s p 500 broadly. What do you read here . Hi. The s p 500 has shown aggressive rallies and selloffs the market is going from extreme to ever wider extremes so what were seeing here right now is a broadening wedge pattern. I had had a similar pattern last year that fed busted last year with 2200. But the technicals still work. When we get the covid19 crisis, we went down to 2200 and then all the way back up in a Straight Line virtually. Its fascinating i think everyone should be aware of that upper trend line thats why we stopped last week. We got overextended. We hit that historic resistance and now we see the reaction. The market is overbought and they came on narrowing participation and a rising vix there is messages in there and so this historic resistance confirmed itself. We have two more things i want to mention and move through quickly here one is the divided s p 500 high cap tech. Would you call it a bubble in tech, absolutely just take apple assen an example. The company took 35 years to get through a one trillion dollar market cap traded a trillion market market cap last summer and added another three trillion in 12 months april sl doing well. There is no earnings story to justify this and so what the chart basically shows you is that Broader Market is actually trading poorly its trading the s p 500 up on an equal weight basis for the m metric existence they exaggerated the move. Anticipa and thats what the illusion here it breeds complaisancy and says things are better than they are in the Broader Market. April come have a banner year next year between kind of pentup demand, iphone delays and so forth. But, yes, multiple has moved up. Before we go, you think the dollar breakout to the upside could be ahead, is that right . Just in a word yes, we had had a breakout today and it could pressure stocks the next few weeks. We have opec next week maybe were getting oversold level to another rally thank you very much, sir. Moving through all of those for us and helping us with the backdrop of the selloff. Tyler, were picking up steam. Apple up 6 as we head to the close. St. If not into correction territory for whatever that means. It goes down right now another 3. 4 or so yeah. 10,850 is the level to watch there for the 10 correction tyler, its been a pleasure. Thank you for watching power lunch, everyone. Closing bell starts right now. Welcome to closing bell. Stock losses accelerating. The dow dropping 600 points. Nasdaq leading the losses down 3. 5 take a look at what is driving that negative action sharp selling led the markets to historic highs apple is down over 5 . Tesla down nearly 20 . Chip stocks big losers as tensions between the u. S. And china continue to escalate and while there is some rotation happening, all 11 s p 500 sectors are lower including the banks despite having