tv The Exchange CNBC April 11, 2022 1:00pm-2:00pm EDT
we speak final trades, bryn, first. >> stay defensive. the final trade higher income. >> raytheon technologies >> joe >> cnx resources >> steve >> staying in cash >> i'll see you in "overtime". "the exchange" is now. thank you, scott hi, everybody. i'm kelly evans. yields keep spiking globally it continues to be a head wind for the nasdaq since last monday the nasdaq is down 1,000 points. about 7% but is recession talk premature in our guest says even the downturn in frns transports isn't as bad as you think. the musk now won't take a seat on the board what's his next move does this pave the way for him to buy more of the company
shares and behave more like an activist investor? as china's covid lockdown strikes more of the manufacturing base, are u.s. companies on the look to move their operations apple is growing operations in india. biden is meeting with the prime minister right now we'll have more on the fallout with china ahead first, let's get a quick check on the markets dow is down 230 points that makes irt the outperformer. that tells you what kind of session we're having the s&p down more than 1%. the nasdaq down 1.5% a 7% correction. commodity complex under pressure today mostly because of oil. it's down 8% in the past week. it's down 4 % today. wti barely over 90 a barrel. the chip stocks, partly a result of the china covid lockdown. you can see the effect on growthy areas of the market. some of the worst performers in the s&p today. nvidia down 5% after a downgrade over at baird.
amd down by about 3% it's off the lows right now. nvidia down 20% over the past week it also comes as the ten-year treasury yield has spiked to 2.78 % earlier today that's the highest level since 2019 we're just below the benchmark right now. everybody is talking about this move new highs and bond yields and other parts of the globe everyone is watching amazon as a bellwether as well tomorrow morning the march cpi report we have nervousness ahead of that let's get to steve liesman with the closer look at the fed's tough job ahead. >> kelly, an in depth look at the previous efforts to fight inflation shows the central bank has won four out of four of the past fights since 1977 it could take a long time, and sometimes the fed wins ugly. it took 37 months from that first rate hike in 1977. it took sharp rate increases for
the fed and recession to get inflation under control until it peaked in 1980 it took nine months in 1999. and a bit over a year in two other episodes why does it take so long here's what we found for one, the unemployment rate, it keeps declining even after the fed starts hiking. sometimes for months it declined by almost 2 percentage points after the first hikes in 77. 1 .2 percentage points under greenspan in 2004. the effects take time to slow the labor market and economy the lags help explain why some officials want to move with urgency now, acting before inflation expectations become anchored in the public's mind. now, looking at unemployment, once unemployment starts to rise, it can do so sharply in 1977, up by 5 percentage points 1999, more modest two percentage points you can see in '04 it ended with the financial crisis and a big jump in unemployment the fed often fails to see that
inflation has peaked, and it keeps rates up there too high for too long that's a reason for the fed. now at the beginning, but the more cautious how far it goes later in the process >> that is one approach we will see if it bears fruit. steve, thank you my next guest says higher rates are going to cramp business and consumer spending and investors need to adjust accordingly. joining me the senior portfolio manager at american century investments. are you talking growth slowdown? i don't want to use the r-word, but how much of a slowdown do you think somebody. >> it's good to see you. i just want to lay out the processes bottom up. so while we are aware of macro factors like interest rates and inflation, we are really driven by a bottom up process and where that's leading us today is to consumer staple stocks, pharmaceutical stocks and energy and banks >> consumer staples pharma or
health care, some will call it energy banks i don't want to say they're super consensus, but they are. like you said, you're bottoms up you're looking at the companies themselves, the balance sheets what about the process is driving you into the sectors why should people feel comfortable doing what the rest of the crowd is doing right now? >> we're trying to find higher quality companies, companies that will do well in an economic slowdown or even a recessionary environment. they hold up better, but also in a growing economy, they will participate nicely as well and so that's where our process is leading us today toward consumer staples and pharmaceuticals, banks and they have better risk rewards. they have better valuations. >> sure. and some of the individual names may surprise people. for instance, foodline's parent company, a hold, you also have general electric in here, a
battle ground company far long time truist financial let's start with the food line parent company why this name? >> so this is ahold. and they are well-positioned as a retail grocer. they have a 60-40 split between the u.s. and europe, and they're number one in the neterlands and belgium, and their strategy consists of increasing the risk of higher margin items like fresh food and private label building a mini amazon in countries and improving their omnichannel offers a decent balance sheet and a 3% dividend >> would you describe others as differently? >> i describe them as different. but they underperformed lately, and we think they have good risk reward ge, diversified industrial with
leading market share aircraft, engines and medical diagnostic equipment and the strategy is to streamline the operations, strengthen businesses they decide to stay in. strengthen their balance sheet by paying down debt. they're going to split into three. it's three smaller businesses that are more focussed, and we think it will allow them to grow faster that's a catalyst maybe a year or so away we think it's very important, shareholder friendly move, and we think it's trading at a cheap valuation. >> yeah. >> so then you talk about truist, truist was formed by the merger of two companies. they have a real opportunity to create value by integrating the banks, achieving quite a bit of cost savings, raising the returns on capital they have a lot of capital to deal with, so they're a safer bank relative to most banks out there strong underwaying standards they're also trading at a modest valuation, a 3.6 % dividend
yield. we think they're also a good risk reward. >> i think i could probably characterize these as value stocks it depends on who you can, but the point being value stocks as they're styled are outperforming and have been since the middle of last year or so how long can that outperformance last >> that's a great question and it's been such a short amount of time you can go back to the middle of last year and say that the value has outperformed this is the real opportunity we see. growth has really clobbered value for a long time. it's been painful as a value investor but we're sticking with what we tell our clients we're doing if you look at the valuation distarty between growth and value stocks, you have to do go back to the dotcom bubble to get to a disparity this wide
the difference has barely closed over the last three to six months and there's a lot more to go depending on the valuation market, it's two to three standard deviation difference between growth and value stocks. we think there's quite a bit of opportunity. we're excited about that for our clients. >> it's not too late to get in, in other words mike, thank you for joining me today. i appreciate it. >> great, thanks for having me on >> a news alert on the housing market diana with the story >> tell me when i start to sound like a broken record mortgage rates took another major leap the 30-year fixed stands at 5.25 %. that according to mortgage news daily. that's the highest rate since august of 2009 and it's now roughly two full percentage points higher than a year ago what does that mean for home buyers on a $400,000 house with 20%
down, you're paying 370 more a month, and that doesn't factor in this house now is 15% to 20% higher than year ago not good news for the home builders, getting hit hard in a rising rate environment. etf is up slightly for the day, but still way off year to date kelly, i don't know. every day another jump >> i was also struck by that the itb, the xhb, home building etfs are in the green and the moves are stunning we're seeing almost when you showed the chart going back to '09, a vertical line up the past couple months. crazy. >> yeah. it's going straight up we think every now and then we're going to get a little reprieve it pulled back a tiny bit, buzz up again friday. you see the big jumps like the one today. it says we're not seeing the ceiling anymore. we used to see kind of a ceiling for mar gaj rates that hold there and bounce back and forth. now they keep going up
wh where. >> where do we go next >> wherever the ten-year yield goes, so goes the mortgage rates but remember, mortgage rates are going higher even more strongly because of the fed pulling out of the mortgage market that is not buying more gaj-backed bonds it's a double whammy and mortgage rates >> thank you for bringing that to us. diana in washington. 5.25% mortgage rate. what is up elon musk's sleeve and is it good for twitter? we'll see how warner brothers stacks up against the other streamers and what it will take to stand up on wall street? [sfx: street ambience]
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welcome back shares of twitter are up nearly 20% since elon musk became the largest shareholder. he's declined to join the board. he was offered the seat, i believe. julia has the latest on what just went down julia? >> well, the very latest is that twitter shares are up more than 2% right now they opened the day down more
than 3%. and this all comes after last night the twitter ceo announced that musk will no longer be doing twitter's board. he tweeted out, quote, i believe this is for the best we have an will always value input from our shareholders whether they're on the board or not. elon is our biggest share hold yerks and we will remain open to his input. musk not holding a board seat means he is no longer required to keep his stake under 14.9%. this sparking speculation he could take an activist stance. this morning the amended twitter holdings filed with the sec saying musk may express his views to the board and/or the public through social media and other platforms. this comes after musk posted a tweet storm on saturday which he has since deleted. he was recommending changes for the company's subscription service. twitter blue, including a price
cut, authentication for anyone who subscribes, and banning ads. that attacks the core of twitter's business model and now that musk isn't limited by his role on the board, web bush predicts a "game of thrones" style battle with musk taking a more hostile stance, saying he could potentially join with a equity partner and a sale of the company it was tweeted there will be distractions ahead guys, that is the one thing that we know for sure >> i'm interested in whether this is good or bad for twitter investors. julia, thank you my next guest is no stranger to boardroom sagas and says elon musk being on the twitter board would be a needless distraction for him. here to talk about that is jim stewart. jinl, it's great to have you welcome. >> thanks for having me. >> and a distraction for musk? >> i meant especially the board.
i mean, this latest example is musk being musk and being impulsive. i don't think we can conclude at all this entire investment is a product of long-term rational plan imagine being a fellow director with elon musk being in board meetings, getting access to confidential information, maybe agreeing or not and deciding to go on twitter and say whatever in the moment he feels like doing. he's already demonstrated that he cannot really exercise much self-control when it comes to his disclosures. so putting him in a position of having all this confidential information, i think, would have been a potential disaster. >> but here's the problem. it's also brilliant marketing. right? tesla has not had to spend a penny on advertising ever, and that probably saves them hundreds if not thousands of dollars per car. so musk's presence, much like i am going to say it, much like trump, tends to draw a lot of crit
criticism, but also a lot of attention. is that not what twitter needs the most right now >> the thing is he can get all the attention for twitter he wants without being on the board. in fact, i would argue he could get even more. he's going to be much freer. he doesn't have a fiduciary obligation to other shareholders if he's not a director he can tweet about what twitter ought to be doing within reason. again, his kind of twitter storm he deleted, i suspect, he was told by his lawyers you've got to be careful when you're 10% shareholder what kinds of possibly market-moving information you're putting out there. nevertheless, he still has his platform he's the bigger shareholder in the company. that guarantees a tremendous amount of tension. and i don't think he needs to be on the board for that. >> the most telling or significant of his tweets, i thought, was the one about the business model because it's true. of course, that if twitter needs to be an -- it has to some extent sanitized if not, if he's serious about moving it in a different
direction toward one that depends more on subscriptions or what not, then it could be a little more free-wheeling, shall we say what do you make of the potential outcomes for the business one way versus the other? >> well, you know, that's -- i think that's an interesting question he came up with this idea, let's get rid to the ads he didn't say how are they going to replace that revenue. at the moment, it is an ad-driven business i assume they have done pretty in-depth studies as to what twitter would look like if it moved to a subscription model or primarily subscription, maybe some advertising in there. i assume they have done that and they have the data on that what it actually shows, i don't know but the fact they haven't moved in that direction suggests to me that for now they see it as a mass volume, ad supported platform >> final question on this. do you think it's been a very good or very questionable experience for twitter overall, his involvement here
>> well, if you look at the stock price, you have to say it's good. i mean, musk has a cult following. the stock is up dramatically it's even up again today after he said he wouldn't go on the board seat i think from a purely shareholder perspective, you have to say it's positive. from a management perspective, they're warning about the distractions it's a double-edged sword to have everything that happens there in the media there's going to be a lot of scrutiny, probably controversy and so from that perspective, i see it as possibly distracting, but i think from a shareholder perspective, the endorsement of musk is positive >> because you're here and because it's a really significant day for streaming, i want to get your thoughts on the warner media discovery deal. the company, the prospects how does it look to you early on any sage advice here >> well, i find it fascinating i think the good news here for the warner people and warner
shareholders is you have an experienced entertainment executive now running the company. i mean, the stories and the complaining i heard the last few years about the at&t decision making process they had to go through, you know, i could go on and on about they hated it. i think there's going to be a big operational improvement. the overashlging problem, which not only warner media faces but most of the other players do, too, the streaming business is a hugely scale business. it's taking -- it's a nuclear arms race of spending and can they match -- i mean, they are now a distant fourth place in this universe behind netflix, amazon, and disney, and can they compete on that level? you know, i think that's questionable and now we see them, they're all on the brink of talking about moving into the metaverse. you have to throw -- and that's going to be the new frontier of entertainment. now you have facebook which
changes it name to meta. amazon with fire power, microsoft, the gaming companies. as a shareholder, this would make me nervous. >> and rightly said as we look at at&t. the shares are allying after a tough stretch. jim, great to have you thanks again >> thanks. still ahead, jet blue and spirit had wall street buzzing about a poeshlg tieup last week. now spring breakers are getting a buzz kill after hundreds of flight chancelations over the weekend. the dow transports are coming off the worst week in nearly two years but are investors misreading their weakness "the exchaj" is back after this.
welcome back another tough session for the nasdaq shutting another 1 .5% to bring the recent correction to about 7% since last monday sectors, energy is actually the worst performer followed by tech and consumer discretionary energy down 3% oil prices slide and all the mega cap tech names are down including apple, microsoft, alphabet, amazon, and even tesla check out the declines from the all-time highs tesla down 20 %. apple down about 9%. shopify is planning a 10 for one stock split in an effort to make shairs, quote, more accessible to all investors the stock has lost all the value since january 1st and is in the worst monthly losing strike in six years. oat futures, think oat milk, they're at the highest level on record amid severe drought
conditions and the dakotas and canada seems like everywhere you turns commodities are spiking. wheat futures in a two-week high after the forecast for ukraine's wheat exports. sun flower oil, another ripple effect of the war in ukraine it's pushing cooking oil prices higher soybean oil futures up more than 30%. a record high early last month all oil hitting the highest level in more than 12 years. now, all of this because russia and ukraine are two of the world's largest exporters of sun flower oil germany is one of the biggest clients. 27% of their oil comes from russia the lack of imports is spiking prices across the group and having an unexpected impact. fewer french fries on german restaurants. carmen right here telling us if you can get your hands on sun flower oil at all, expect to pay
500% more for 10 liters. they use about 80 liters a month. they've started to substitute items on the menu as a result. they're staying afloat thanks to regular customers who have been paying above menu prices as a supportive gesture time for a news update >> no wonder everybody is talking about major food issues coming out as a result of this war. here's what's happening this hour president macron hitting the campaign trail after leading in the first round of presidential elections yesterday in france. he headed to a northern part of the country where people prefer far rightcandidate marine le pen over him by 3 to 1 another poll shows macron leading in the election less than two weeks away. pakistan elected a new prime mini minister khan lost after a week of political turmoil that ended
with his ouster. in washington state snow continued to fall this morning after record breaking storms over the weekend winter storm warnings remain in effect until late tonight in some areas snow totals for some regions could hit 12 to 18 inches. on the news tonight, shep smith, what russia might learn from iran about evading sanctions tonight at 7:00 p.m. eastern time >> tyler, i'll see you soon. thank you very much. still ahead, ev maker niyo suspending production. the stock is down about 25% in the past week. we have the latest plus the pandemic has led many companies to make supply chain changes including apple. could india emerge as a big winner as a result that'somg cinup new project ma. you need to hire. i need indeed. indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. visit indeed.com/hire and get started today.
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develop a continuity plan. eunice is live in beijing with the latest on the lockdowns and the surge in cases sparking panic. >> reporter: absolutely. plenty of hoarding this happening even before it was announced that the city was going to be mass testing the entire 18 million residents. those residents have undergone not just two but sometimes three rounds of mass testing by today. this is after the export hub head confirmed 41 cases from friday so other measures in the town include shutting the schools and converting the venue that usually is used for the canton fair >> trying to wait a second if we'd get her back. we'll go back if we do she was reporting on the latest covid lockdowns in the country
affecting markets globally and also a lot of companies which have supply chain reliance on china. india could be well positioned to pick up some of the business. we're seeing it already. apple moving iphone production there starting iphone 13 production today joining me to discuss, see the dseema and steve >> this has been this weird up and down story about apple in india over the last let's call it six years they've had various levels of success trying to make the cheaper iphones or older models of iphones there sometimes it works sometimes it wasn't. the idea is they can make it there and sell it there. indians usually spend no more than $200 on a smart phone and we know it costs more than that it hasn't been working out well. the fact they're building the latest and greatest model there is a significant signal that as apple thinks of diversifying
away from china, india is a hot spot >> the indian prime minister and president biden held a call this morning. i'm sure this was a big part of the discussion the idea of how to deepen supply chain reliance and for years india has been an opportunity, but also a challenge, because it just doesn't have the same economic system or infrastructure that china does >> for years the question is why isn't the world's most popular technology company having more presence in india. this is significant, especially on the ground in india one of the reasons you're seeing more foreign companies invest there is because the government unveiled a new incentive program that provides a subsidy to foreign companies that boost manufacturing there. so i think that helps apple. that's one of the reasons you've seen over the course of the last six months samsung, foxcon, pegatron as well to get more competitive with china, there's more work to be done >> it's not like they have just
announced it today with a lot of bells and whistles they've been doing this apple, i mean, has been manufacturing in india for several years. the presence has to be some sign they think it's working. >> absolutely. i think one thing you are starting to see is even though india has a talented work force, many of the top people that graduate from the harvard plus stanford in india, immediately go to like google and mierks but you're seeing more of the home talent stay in india, because salaries are starting to rise there that's a good sign another reason why i think you're starting to see more western companies see that's not becoming as big of an issue as in the past, the talent. >> it's not just apple that has diversified? >> yes air pods >> vietnam >> yes made in vietnam. again, the vast majority of apple products from phones to accessories are still made in china.
but you're seeing them dip around to other places vietnam is one malaysia is another. the new max studio computer they announced last month is built in malaysia even a little bit in the u.s but just a drop in the bucket. the vast, vast majority of their production is still linked directly to china. >> does it raise the cost of doing business for them to move outside of china >> eventually, but if you listen to what tim cook said on the last call, he was asked about this everyone was talking about supply chains. it's not the cost. it's the geographic closeness of where the suppliers are throughout china for all the parts inside the phones and other products, and how quickly they can get it from that supplier to the foxcon facility where it's put together and out the door and shipping across the world. it's timing, really. >> well, and it's the whole sort of apparatus >> and how do you recreate that if you cancel china out? with all the suppliers locked in over there >> it's complicated. >> and we should not neglect to mention, this is an important
moment for china i know that's what eunice was going to talk about. here they are. they've dealt with coming out first from the pandemic. their gdp was first to get back up their zero covid strategy looked like it was working the best, and now this challenge at the time the supply chains are already tested and people have the other opportunities. so when they have to shut down the latest city that she mentioned, once again, it makes the corporate leaders go maybe we need to look to other options. >> it should accelerate this whole pivot away from china, or at least investing more in broader asia it was interesting the extreme lockdown in china. you're hearing a number of businesses in india say this is a wakeup call for us, not to be as reliant on china going forward. and what you're also seeing is beyond china's philippines, japan, the other asian companies are relaxing the covid lockdowns. that is a sharp contrast to what we're seeing to your point >> and this is the biggest sort of choke point it feels like for
china in this pandemic thank you. coming up, according to one retail analyst, spring has not yet sprung higher energy costs, colder weather, it could all eat into spending and is already eating in performance it could be a problem in particular for this retailer whose stock is down 22% over the past year. ald the analyst sees more chlenges ahead we'll outline them next. with billions of passengers taking millions of trips every year? you aren't about to let any cyberattacks slow you down. so you partner with ibm to build a security architecture to keep your data, network, and applications protected. now you can tackle threats so they don't bring you to a grinding halt. and everyone's going places, including you. let's create cybersecurity that keeps your business on track. ibm. let's create
welcome back it's been a tough go for retailers as they grapple with inflation, the supply chain issues still lingering staffing shortages the xrt retail etf down 15% to start the year well below the broader s&p while views on the consumer were mixed, leaders struck a cautiously optimistic tone in their meetings according to my next guest there was one exception, and that was best buy. the mystery chart we just teased joining me to discuss, senior
analyst at jpmorgan. it's good to see you let's start with best buy. what did they say? >> well, best buy is suffering from what a lot of my coverage is suffering from. they were covid winners. they took share during covid you went home, worked from home, you learned from home. people got checks so they were buying computers and iphones to your last piece and televisions. these products last a long time. and now we're seeing the other side of that as we lap through stimulus people are starting to go back to work at an increasing rate people are starting to go outside of their home. they're starting to travel and go on vacations. they're just not focussed on spending on that home. and that computer still is in great shape that you bought one or two years ago so the issue is that we have to go through a period of time here and let that replacement cycle normalize until you might go out and buy your next one. on top of that, there's more pressure on the consumer than there ever has been. at the margin, that risk could
last even longer >> yeah. we've set foot in a best buy for the first time in a decade podcasting equipment, all the stuff everyone was doing and now you're set for a while they're the exception, you think to what was more broadly a little bit more up beat tone who stood out to you >> well, so we have one reopening stock in my coverage that's ulta beauty they benefit from people going back to work, putting makeup and cosmetics on going to events like parties, graduations and travel they're very excited there's a lot of inundation in the category this year there's a lot of newness that great for ulta. i think the middle three companies call that home depot, lowes and target, there's a question going forward, especially with the housing side rates moved up a lot housing obviously booned during covid. spending on the home booned
during covid you might not need that new appliance. you might not need that new grill. you might not need that new dishwasher that's something that will play out over the year. and given the lag correlation to home improvement demand, things probably get worse in the back half of the year now that mortgage rates are up almost 200 basis points, and actually, back to precovid 2018 levels >> and you cite ulta just to go back, as one example of a company pirchled by fuel surc surcharges a lot of people might not be first to spring to mind. housing that be a struggle advanced awe or the, what was the tenor there? >> the auto parts broadly, it's an interesting space the diy consumer, they change their own oil, work on their own car because they have time and can't afford to get it done at the shop there's a benefit there. but the rest of their business overall is driven by miles driven so you and i going back to the office, that gets cars on the
road that is precyclical for their business despite higher gas prices, miles dwrifen should continue to grow, and because there's a supply chain issue around new cars and producing new cars, people are investing more money in keeping their existing car going and that is great for the auto parts business including auto zone j advanced auto and o'reilly auto parts. >> we know auto demand in general has been -- you could call it a head wind as we go post pandemic, but you don't see it going the way of best buy let me end with target one of the most widely owned retail stocks. where do you see it going if here >> we love target. it's one of the biggest share gainers in the coverage. if you think about covid winners that have a better competitive set going forward, there are a lot of closures on the mall. a lot of department stores closed that's great for target. 55% of their business in general merchandise, that's apparel, home furnishings, that's electronics gaining share.
the other 45% is consumables we like it better than walmart it's a higher income consumer. you have less risk of trade down private label. and negative general merchandise mix. and frankly, if you went back to the fourth quarter, they have the best traffic trends in all of large cap retail. even better than mightily costco >> mighty costco we talk about them a lot chris, it's great to have you. and maybe a little more up beat message than what we're hear act the economy more broadly we appreciate it coming up, airlines are bucking today's down trend despite many head winds facing the industry how the summer travel season is shaping up and some of the drastic moves carriers are making to deal with shortages. we'll talk about that next hybrid work is here. it's there. it's everywhere. but for someone to be able to work from here, there has to be someone here making sure everything is safe. secure. consistent.
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shares of jet blue and alaska both higher today after siccing over the past week as the company's announced their trimming summer schedules to keep disruptions to a minimum after hundreds of flights were grounded last week april has been rough for jet blue which has taken a major leg lower, especially after the bid for spirit airlines.
staffing shortages, jet fuel prices at multi-year highs what happens next for the airlines joining me to discuss is leslie josephs. these should be the best of times because of reopening how severe are the staffing shortages and how pervasive? >> they are pretty much across the industry in various work groups pilots, we've seen some of the most acute shortages that's always a tough one because you can't really hire someone on board and put them in a cockpit the next day we're talking weeks of training. we've seen bottle necks there. some of the airlines are turning to pilots in australia to fill their ranks. that's one of the trickiest ones it really is across the industry the good thing is that demand is back and two years ago almost to the day, we hit the lowest of the lows in the pandemic tsa screening. 87,000 people in a day now we're solidly above 2 million people a day just -- it's been windy road
>> and for a while it seemed like the airline stocks were tracking the rebound in tsa traffic. we've seen a divergence where the numb of travelers keeps rising but the stocks have been struggling and even into late last year, i think, they peaked. >> right and late last year, i mean, omi created a bunch of staffing shortages and traffic for christmas and new year's holidays and end of the year and now airlines are dealing with high fuel prices and the biggest expense after labor. this their favor demand is back. a population is locked up in pandemic for two years despite the higher fares travelers are willing to buy and fly. >> which must be all the more frustrating for the operators. jetblue had a series of missteps
"the wall street journal" survey showed the worst airline what does management need to do to try to get it back on course? >> they announced over the week that the staff is cutting 8 to 10% of xacapacity for may and te summer airlines don't like to overpromise and underdeliver as much as customers think that caught in the spirals of delays and have to go through that. but it is a headache and costly for the airlines spirit airlines last summer had issues and canceled thousands of flights and cost $50 million american, southwest had similar things in the fall and trying to prevent that from happening. by cutting 10% of jetblue's schedule they think that will
give them the breathing room to deliver better. >> do they stand out in struggles this year? is this the right time or why they need to go after spirit coming from a position of weakness here? >> one thing, jetblue does kind of straddle two worlds they have business class and a high touch service and screens on the seats and then they want to be a low-ko carrier and be all things to all people and i don't think i have had a conversation with an annalyst of what happens to jetblue? they want to grow and this will give them access to the airbus order book and hundreds of pilots and if regulators okay it and spirit it is going to take
years to integrate it. jetblue wants to get rid of discount brand and takes a long time. >> it is stunning here with spirit down 30%, jetblue down 42% over the past year getting back to normal thank you for the time. >> thank you. up next, with the transports falling so far this month, bank of america said last weir markets are weaker an annual oust expects two names to beat and raise this earnings at nt "e chge th'sexonthexan." ♪
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bank of america downgraded nine names citing demand weakness and pricing concerns he discussed that call. >> from a freight perspective we have gone through a couple downturns but this seems broader looking at the comments that are coming to us. >> my next guest said he's worried of false negatives in the data as modes shift and staying bullish on the sector. joining me is donald broaden good to see you. this is of more importance than stocks like fedex but the economy so what are you seeing >> it is so always good to see you. there's delays seasonality january is weaker than december and that's not what we saw this year january up over december levels.
it wasn't until the end of the first quarter to see the tail off in seasonality might be delays part of seasonality. if you look at what's out there, the contract market fuel surcharge resets once a week spot resets every day. they don't have to pay -- essentially avoid paying some of the fuel surcharge legally and so that creates more softness in spot than you would see otherwise but biggest factor is mode shift. when you shift goes from over 600 miles to 450 miles and that's showing up as weakness in drive and truckload and big boom
in demand for the domestic players. >> so fortunately we head into earnings season. people say beat and raise but what are they going to tell us is going on in the sector? >> since they have both trucking and intermodal they see the moving pieces and maybe the drive and truckload business is weaker but we see a pickup in the modal region so they're low pricing power per load might go up $1,000 but the costs go up $100 a load. you get increased margin and that's driving why you saw flat bed doing
extraordinarily not bad but they see increases. two to report is jb hunt and martin and both will say what weakness >> i certainly hope so donald, thank you for joining us as we head into the stretch. >> always a pleasure. >> that does it for "the exchange." "power lunch" begins right now ♪ thank you very much. i'm tyler. welcome to "power lunch. tech tanks tanks for the memories, tech investors shed risky assets but as stocks pull bag m&a in the software sector is heating up. which names could be the m&a targets. week long look at travel we focus on the booking sites. the stocks are way off the