tv Worldwide Exchange CNBC May 16, 2022 5:00am-6:00am EDT
it is 5:00 a.m. at cnbc. here is the top five at 5:00 stocks looking to hit the reset button after the rocky trading week and recession warning. comments from the former goldman sachs ceo on the signals he is seeing that a tough economic road ahead may be looming. and the crypto crush continues. bitcoin below $30,000 mark as they struggle with the terra stablecoin. the drama over the twitter takeover bid
the tesla ceo says the legal team is accusing him of violating a nondisclosure agreement on the back of the comments of fake accounts. it is biden versus bezos goes after the president after the handling of sky rocketing inflation. it is monday, may 16th you are watching "worldwide exchange" here on cnbc good morning i'm frank holland in for brian sullivan let's kickoff the hour with the check on the markets and your money. stock futures are in the red dow jones industrial average taking a turn very early in the morning. dow jones industrial average will open in positive territory. s&p and nasdaq, however, in the red. this follows a big rally on friday dow climbs 1.5%. s&p up 2%. nasdaq really the big winner
jumping 4% that wasn't enough to undo the tough week all of the indexes falling 2%. the nasdaq is the hardest hit from all of them you see it on the chart. turning to the bond market coming in at 2.922 on the 10-year note it is a big threshold over the 3% mark. tech stocks hit. slipped on friday as investors made the move out of bonds and piled back into stocks the rally we saw on friday the oil market the price of wti is sitting at $110 a barrel. elevated over the levels last week down slightly this morning global supply fears back into the energy sector as the eu is preparing to phase in a ban on imports from russia. we have to talk about crypto crypto prices continues to grapple with the fallout over
the terra coin down almost 2% ethereum down 3% this morning. check the price of terra we are seeing it down here at fractions here down 21% this morning. falling to 1 cent last week. we will have much more on the collapse coming up let's turn to breaking news with jetblue launching a takeover bid for spirit airlines phil lebeau is on the news line with much more good morning, phil >> reporter: frank, jetblue will make a tender offer of $30 a share as part of the hostile takeover bid they are launching a campaign urging to reject the offer with spirit and frontier. the spirit board and frontier board reached agreement a couple of months ago. those spirit investors will be
voting on that agreement on june 10th jetblue is saying don't buy it reject it. force the management of spirit to come back to the table. i had a chance to talk with j jetblue ceo about the hostile bid. one, spirit's board has not done its job with engaging with jetblue. they tried to get spirit's board to engage and have a true full faith negotiation. that is one reason for the hostile bid. two, he wants to share what their logic and rationale is with spirit shareholders spirit said it has twice rejected jetblue offers on the be belief, in large part, they believe the doj will block the merger with spirit and jetblue it believes a merger with frontier is a better offer
that argument is a smoke screen. as a result, they are launching the hostile bid of tender offer of $30 a share that extends through june 30th they already met with investors. they are willing to go up to put $ 3 33 a share this a full-on hostile tile bid buy. frank. >> we are looking at the stock up this morning. what is next in the saga >> reporter: it goes back in the court of spirit. they said repeatedly i talked with executives there they do not think that a merger with jetblue, even with certain
difficu divestitures -- even with those concessions offered to the doj as part of the review of the merger with spirit and jetblue, spirit management does not believe that this is a deal that would go through now do they change their mind knowing there is this hostile bid and say let's go back and negotiate further. robin hayes made it clear. they have not had a full engagement with spirit this is not the case where they share their opinions and views and their thoughts in terms of why a deal would make sense. he believes spirit board as essentially made up its mind already. he is hoping that spirit investors can force the management of spirit to come back to the table and not see a final approval go through with spirit and frontier.
remember, june 10th is when spirit shareholders will vote on the deal with frontier and spirit >> phil lebeau launching a hostile takeover bid. phil, thanks for waking up. let's go worldwide julianna tatelbaum is tracking the early trade over in europe julianna >> frank, good morning we have only been open two hours in europe. it has been a volatile session we opened up in the red after disappointing data out of china overnight. showing the impact of the covid lockdowns has been more severe than many expected now we are trading in the green. the positive momentum is building over the last hour. the stoxx 600 is currently ten basis points higher. turning to the individual regions. let's get a look at how they are trading. every major region is in the green. just about ten minutes ago, we had the dax at the flat line and
cac 40 in negative territory momentum is building in the positive direction last week, european equities ended the week lower, but only about .8%. the story was volatilityjust like you saw stateside this is what the split looks like this morning. we are see basic resources sector up 1.8% households goods down. frank, the developments over the weekend. sweden and finland declaring intention to join the nato all alliance >> julianna, thanks for the latest on the early trade in europe now turning attention to the other top stories. silvana henao is joining us with those. good morning >> frank, good morning elon musk says twitter legal
team is accusing him of violating the nondisclosure agreement. he said he would conduct a sampling of 100 accounts to check how many were fake he used that number because that is what twitter uses to calc calculate. he said on friday the $44 billion acquisition of twitter was temporarily on hold while he investigating the bots and spam accounts which makes up less than 5% of accounts. aramco reports first quarter record results seeing an 80% jump in net profit to $39.5 billion that is up from nearly $22 billion a year ago the results come days after aramco surpassed apple for the world's most valuable company. and the average pay package of the biggest u.s. companies
reaching a new all-time high last year. new data from the wall street journal showing that figure climbed to $14.7 million in 2021 setting a sixth straight annual record the journal points out that the pay is equity awards that can prove to be worth more or less thanreported nine ceos got pay packages of $50 million last year up from seven in 2020. >> silvana, thank you. when we come back on "worldwide exchange. we are heading to the cloud as they see a rebound in stock prices we look at the names to watch and if they are worth to buy. and the retail earnings on tap. the pain for rivian. it cuts its stake in the ev
if i were running a big company, i would be prepared. if i was a consumer, i would be prepared it is not baked into the cake. >> let's talk about this and other issues with seema shah thank you for being here, seema. >> thanks for having me. >> interesting note from you rapid inflation and rise in the ten-year left many portfolios misaligned in 2022 which is the era of real assets securities tied to the real assets we see that playing out with energy in the s&p this quarter up 5%. real estate is down 0% how do you suggest investors play your thesis >> i think we have to be focused. with real assets, we have to see just with fixed incomes. the preference is the energy commodity space and infrastructure the reason is those are the asset classes which do provide some inflation protection.
they typically have stable earnings growth and quite diversified generagainst the traditional equity classes which can be challenged in the current environment. >> interesting thought here. are you suggesting that investors should buy more in actual commodities or stocks that benefit from the rise what stocks are those? i have seen consumer staples with a rise. it doesn't seem like many companies have strong pricing power right now. >> it is interesting we are seeing some firms with pricing power. typically the technology firms have some. they are challenged right now. it is getting exposure to the commodity space. the companies that have pricing power will find power as the year goes on we will see margin compression
and ends growth down to the early single digits. >> historically, right now, 3% yield on the 10-year yield it is not high it is high in relative terms since the great recession. we are seeing it below 3%. last week, we appeared to hit a level of resistance on the yield at 10-year at 3.2% on monday if we stay below the 3% mark, what does it mean for equity and bonds? >> we have to wonder why it came down below 3%. we know the fed will hike aggressively in the next year. why haven't bond yields hit that the reason is analysts are looking for recession in the next year or so. it is difficult to see 10-year yields moving above the 3% point. against the back drop, it is difficult for equity to perform
well there will be pockets. we like companies with strong balance sheets which she pow pricing power. on the fixed income side, it is challenging, but there will be areas within the investment space which has stronger credit quality that can provide a little bit of defensive position >> i want to talk about the comments that we are headed for a recession, but a narrow path for the fed to use the tools to avoid the outcome. do you see that narrow path? what tools do you see? we did not hear his take on the tools used do you see a path? do you believe there are tools the fed can use? >> for the fed to bring inflation down from high levels without inciting recession from our perspective, typically monetary policy works with 6 to
24 month lag we will not see painful economic back drop this year. as you look at 2023, that is when things become tougher and we expect recession in early 2024 the fed is very, very much prioritizing fighting inflation and returning to surprice stability. they have to tighten financial conditions when you tighten financial conditions, the economy will struggle >> seema shah, with crypto crashing, a lot of people will look for your note on real assets thank you. still on deck, that's is looking to get the shanghai plant back up to full capacity and facing another hurdle. details eaahd when "worldwide exchange" returns.
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elastic up salesforce is up more than 4%. also 45% off the 52-week high. you saw. it here is a better way to look at it. analysts say the fundamentals of cloud is strong. stock is related it to the 10-year. just get to the point. 3.2% yield on the 10-year on monday appears to be a level of resistance it fell below 3% as it rose a bit. it stayed below 3% and we saw stock moves and we continue to talk about it. at least i do and they beat the drum of the impact of the 10-year. you look at the second quarter it spells it out you see it here. this is the move on the 10-year. you see it here. cloud computing index going down we don't look at the 10-year like this.
up 25% for the 10-year down 25% for the cloud computing. hard to not see the correlation. moving in lock-step. i spoke to luke and he said that resistance level has been identified having valuations based on pe. private equity firm -- i'll remove this mark they use forward revenue multiple the medium for that is 16.5. the stocks that fell below that on friday, we talk about gitlab up 17% sprout social is unchanged and uipath up double digits. now for more on the cloud computing, let's bring in john
freedman john, thank you for being here i ran down a bunch of numbers. let's do something simple. do you believe cloud computing is closely tied to the 10-year >> thanks for having me. you in the short-term within a couple of quarters -- i have seen situations like this before you know, what i always do is go back to the fundamentals and see who has pricing power as your previous guest mentioned who has -- who is the beneficiary of the big migration from, you know, of legacy to the cloud? the reality is in terms of reve revenue, it is 40% done. there is a long way to go.
we think it will cross the 50% mark in 2024 the point is there is a lot of legs to the trend. you know, a number of different buckets of beneficiaries >> a lot of legs to the trend. the migration to cloud is something that everybody can agree on also the recent geopolitical tensions raising the need for cybersecurity. the move to the cloud makes that less expensive why don't investors see the same narrative? we are all familiar with the term the cloud and more of our lives moving to the cloud. what are investors not seeing? >> they're being clouded by fear, right? that's what drives, you know, the market moves in situations like this. clearly, you know, greed hasn't taken over yet maybe that was a sign with greed taking back over on friday clearly, people also don't understand, i think, exactly
what the cloud means it is an abstract fuzzy term it is very real. it creates very sticky businesses people realize salesforce.com. those companies have 97% customer renewal rates and revenue recurring. you will see their growth for a very long time it just depends how you want to price it years from now -- go ahead >> you follow the og cloud stocks for the international audience, pure play cloud stocks what people call on the top of the stack? twilio and unity those are hard hit are there best if class with the interest rates pressure? you mechantioned selling off an people covering losses >> certainly, twilio has been
hit hard they have solid fundamentals their models are not subscription based, but consumption based. those are growth great stocks, but more for the risk tolerant and speculative investor i won't call it speculative. risk tolerant. you've got the cloud conversion companies that are more than 50% or on the way toward 50% of cloud subscription reguvenue. microsoft and then manhattan which saw the supply chain issues and nice systems. the company out of israel that does call center automation. leader in robotic process automation these are being fed by greater
and greater computer capacity. all the while, the markets are doing their thing. for the longer term investor, this is a great opportunity. >> john freedman, thank you. we appreciate the insight. still on deck here on "worldwide exchange. crypto under pressure as the fallout over the terra coin collapse continues we look at if more pain is ahead or if the bottom is in for crypto if you missed "worldwide exchange" check us out on spotify or app oler other podcast apps we will be right back. see him? he's not checkin' the stats. he's finding some investment ideas with merrill. eyes on the ball baby.
stocks looking at a tough trading session to start the week as friday's big market bounce looks to fizzle out. elon musk accused of violating the agreement with twitter on the takeover bid. it's bezos versus biden. amazon founder does not hold back with the criticism of his handling of inflation. it is monday, may 16th and you are watching "worldwide exchange" here on cnbc welcome back i'm frank holland in for brian sullivan 5:30 a.m. on the east coast. here is how your money and the
markets look right now stock futures are in the red little bit mixed dow in the green after a rally on friday. dow climbing 1.5%. s&p up 2%. nasdaq is the big winner jumping nearly 4%. that was not enough to undo the tough week all three indexes finishing lower by 2%. turning attention to the bond market. the yield on the 10-year benchmark below 3% coming in at 2.928 treasury surprises slipping as the move out of bonds and pile back into stocks. look at the oil market price of wti is over $100 a barrel coming in at 110 c crude coming in at 111 the european union is preparing to phase the ban on russian oil. look at the sector of the
fallout of bitcoin above the $30,000 threshold. down about 2% this morning check the price of terra down 26% you know, i don't know how to say that number. fractions of a penny after falling to as low as 1 cent last week a rough ride bitcoin dropping for a seventh straight week. let's get more insight with lawrence lewitinn. thanks for being here. >> good morning, frank >> i want to read your tweet in reference to luna, investors that bought it were warned, but they bought into a false messiah. what were they supposed to save us from? >> p if you look at how people
were approaching ust and luna, we had one of the biggest fund managers in crypto he had a giant luna tattoo on his arm. this was the weird cult around this stablecoin. a lot of people bought into this idea that this was going to work the math was going to work you still had plenty of academics and other fund managers and critics say this was a flawed model we saw models similar to this back a few months ago with iron finance and that collapsed it took mark cuban's money with it it in this case, they knew a few months ago that there was a problem. supposedly, they started buying all of the bitcoin that was supposed to go to shore up the
reserves of ust. we actually don't know if it was used yet to shore up the reserves there is still some questions about that nonetheless the massive cult with ust and luna. bots why on twitter pushing the luna coin and it shot to the moon until it collapsed. >> bitcoin is still around below $30,000, but still around. if it were any other day, we are in the lead. sam bankman freed said bitcoin has into future as a payment network. do you agree if it doesn't have a future, then what? >> there are questions if bitcoin can be used as one there are other layers created, so to speak, lightning network, trying to solve some of the problems that bitcoin has. when you step back a bit and
look at hat's going on, at the end of the day, bitcoin is still used primarily for people to trade among themselves or as a store value. frankly, they haven't used it as a payment method ethereum, that's also very expensive. that's another coin that people spend a lot of money just to transact in. there are other coins, but if those networks start togrow further, the cost of transacting are high look, there are some problems in crypto we have to be honest we have to say it is not the cheapest way to transact or most efficient way to transact. >> even with that said, a lot of excitement in crypto and in the crypto community i want to ask about the relationship with the nasdaq 100 and bitcoin. it seems to be crypto in general. docontinucontinuing
we will continue to see tech being hard hit >> if you think about crypto and hear about crypto as more and more institutional adoption of crypto and more inn substisubstinstitutions investing, all of a sudden, if they start bleeding in tech and they start bleeding in other stocks, they say i've got to staunch the bleeding they empty the portfolio or sell off a bit. what do they sell? they sell the high risk. that's crypto. you will see more and more connection as institutions adopt which the crypto community was cheering we will be adopted by wall street they want the etfs and
everything else. that comes with a price. that is more correlation with the general markets. >> lawrence, we appreciate it. thanks for being here. >> thank you let's get a check on the morning top stories. our silvana henao is here with many more stories on tap good morning >> frank, good morning jetblue is launching a hostile takeover offer for spirit. it is going to spirit shareholders with an all cash fully financed tender offer to acquire all outstanding shares for $30 a share. this comes after spirit rejected the earlier $3.6 billion offer from jetblue in favor of the earlier deal with frontier jeff bezos out with a new comment over president biden's handling of inflation. the amazon founder tweeting on sunday that inflation is a regressive tax that most hurts the least affluent
bezos's comments ones misdirection over the u.s. is on track to see the largest deficit decline. the latest comments come after bezos on friday called out biden on friday over a tweet saying taxing wealthy corporations can lower inflation. the two topics isis misdirection ford unloaded more of the stake in the rivian truck maker. ford selling more shares of rivian according to a filing that that follows the shareses ford sold last week tesla is delaying the plant production in shanghai reuters citing an internal memo. they will plan to have one shift at the facility this week with output pegged to 1,200
vehicles reuters said tesla hoped to get back to the output threshold this week, but challenges with the covid outbreak in china made it difficult to do so. >> silvana henao, thank you. now to another big headline this morning the latest on the elon musk bid for twitter. reveals the twitter legal team is stating he violated the nondisclosure agreement. this comes after musk announced the acquisition with twitter is temporarily on hold if he examines the bots make up 5% of the acts let's bring in arash massoudi. >> good morning. >> a lot to unpack here. the 5% threshold of bots and
fake accounts our, why is this o important for elon musk and twitter? >> it is funny we were hearing about misdirection with bezos and biden. maybe this is misdirection with musk part of the model for how he will revamp twitter is reduce the number of spam accounts and bots you don't get to conduct due diligence after you sign the contract he had the window in advance of the $54.20 a share offer he waived the right to due diligence. if he has concerns about the business, that window has passed unless there is material adverse things he was not made aware of. he is saying roughly meaningless. except the twitter shareholders. by tweeting that, he tanked the twitter shares now he is attempting to buy
twitter at a lower price because without that $54.20 bid and now it is not anywhere near that with the tech selloff. he has injected fear in the hearts of twitter shareholders which is going to inject fear into the twitter board if this deal goes away entirely, they will destroy a lot of shareholder value. >> a lot of fear in the market especially with mega cap tech like twitter you say he signed his name on the dotted line. it seems he may potentially be trying to figure a way out that doesn't seem apparent to us. let's say this moves forward can he get twitter for a lower price? >> it's possible ultimately it is a call to the board. the board is like brinkmansship. the french government had concerns over the purchase of
tiffany and despite the objections, they secured a lower price to buy the company because tiffany knew it would be worse off without taking the offer there is precedent for scaring the shareholders of the board. both sides will have to go to the brink. it could be musk would walk away and pay a fee. if he is considering that $200 billion or so and not spend a bit to buy twitter, maybe paying $1 billion to walk away is to the tnot the end of the world >> arash, it sounds like a lot of things could happen with musk thank you. coming up on "worldwide exchange." retail week to shine as the biggest players prepare to ureyout results. cotn reagan lays out the
welcome back big week on tap for retail stocks the biggest stars repair to roll out results. it comes as questions are managing inflation with prices still near 40-year highs courtney re aagan has more. >> reporter: frank, unemployment remains low with more jobs than workers to fill them home values are continuing
higher stimulus payments are in the rearview and perhaps so is the pandemic pent-up demand spending particularly online. how is the u.s. consumer it depends who you ask if you mean today or tomorrow. there is a mixed message with retailers putting up strong first quarters, but fear in the forecast it is not just profitability concerns as costs rise from continued supply chain and tight la labor. sales are slows. amazon with the slowest sales growth rate in decades e-bay is projecting a slowdown etsy is projecting below expectations walmart and target and home depot and lowe's invested in ecommerce and other operations could any of them pick up online sales share?
decades high inflation could push more shoppers to more value-oriented retail options from walmartto target and tjx and ross stores. poshmark put up disappointing forecasts and in times of inflation, retail would see an in influx sam's club might entice co consumers to fill up carts and tanks. frank, the comments from the fed will be key this week. as a result, the direction of the economy. back to you. >> courtney reagan, we appreciate it. on deck on "worldwide exchange." stocks with pressure to kickoff the trading week tiffany mcghee is laying out
stocks she has opportunity in. in may, we are celebrating asian american and pacific islander heritage month. here is edwardlee. >> a big part of being asian american is finding allyship with other groups. we can't do it alone if you look at the black community, latino community, other people of color, people have been marginalized it is all the same struggle. to think we are apart from that an takes away from our heritage. our big part of our heritage is trying to make it and find success. that's what everyone's trying to do
john williams. earnings from warby parker and take two after the bell. we will have the spacex rocket launch at 2:59. let's bring in tiffany mcghee tiffany, thanks for being here >> thanks for having me, frank >> tiffany, let's jump into it you believe the markets reacting to inflation, not necessarily fed rate hikes, you believe that is priced in how does that explain the action on the markets especially on friday with the big rise >> i think the market is clearly priced in the fed rate hikes look at the volatility of the vix on friday closed at 33 not necessarily the idea or fear of recession you look at the fact that over 20% of the stock in the s&p 500
is trading above the 20-day moving average this tells me clearly there is uncertainty, but not fear of recession. the market also might be paying attention to the fact we just saw wage growth slowing. actual wages are record highs. looking at the cpi increased and the fact the rate of the increase for cpi >> you are saying fed policy is pressured growth stocks. we talked about cloud crashing and big tech crashing. you believe it is creating buying opportunities one of the companies you are citing is uber that is under pressure and slowing down hiring. obviously gas inflationas well pl explain the thesis that uber is a pick with fed policy >> you look at the fact that 60% of the s&p 500 stocks are down
over the 52-week high. nasdaq has 75% in bear market territory. we see s&p 500 valuation coming down 30% uber is right there. uber is down 42% year to date. uber is the company i believed in before the pandemic again, you heard me say this before, frank. for me, it is all about the business model especialliy going forward. uber worked to create the sticky ecosystem with the delivery and ride share they are advertising business which is a high-margin business. they will be cash flow positive this year. i'm looking at uber as one of the tech companies that is really trading in a discount right now. i really believe in it long term. >> let's switch gears. conagra brands
pam and orville redenbacher p popcorn. >> that's not why i like it. i am looking at what things i want to buy going forward. value stocks have done well at times when inflation slowed, but still elevated like our current environment it is getting harder to identify value stocks an a lot of people use price to value. i look at free cash flow that brings me to the conagra brand. that is cash after the bills are paid you want it high because companies can pay dividends and reinvest in business conagra.
don't forget about the marie callendar pies they have a 12-monthly cash flow through january of 2023. that's why i like them. >> we are running out of time. i want to hit one thing quickly. you said two things can derail inflation. hit on one quickly what is one thing that can derail inflation >> the first thing is increase yields on long-term bonds. those yields increase and it will push mortgage and other loan rates higher and cause consumers to spend less and increasing inventory. >> tiffany mcghee, thanks for being here have a great morning that will do it for us on "worldwide exchae.ng "squawk box" with joe, becky and
good morning going hostile. jetblue intensifying the takeover bid for spirit airlines after spirit rejected the initial offer. details ahead. the biden administration sparring with one of the world's richest people jeff bezos taking issue with the tweet that linked inflation to corporate taxes. plus, former fed chair ben bernancke will weigh in on how the fed handled the inflation crisis >> it was a mistake. they agree it was a mistake. >> more of that interview throughout the morning it is monday, may 16th, 2022
"squawk box" begins right now. good morning welcome to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm rebecca quick along with andrew ross sorkin and brian sullivan joe is off today >> good to be here >> i read through the beginning parts of this, andrew. you don't want to miss this. there are substantial things ben bernancke has to say you want to stick raaround >> thank you for that. he takes on all questions and provides clearances. >> very thoughtful maybe some more pointed comments than you anticipate. you have to stick around for