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tv   The Exchange  CNBC  May 25, 2022 1:00pm-2:00pm EDT

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be as hawkish as powell's speeches and they'll come out today at about 2 clg >> about an hour from now. joe. >> trowe price bought the other day >> and pete. >> i'm going to give you citi. i think they're the most upside. >> see you in a few. "the exchange. is now >> thank you, scott and welcome to "the exchange." everybody. i'm kelly evans. investors are still reeling and mortgage applications continue to drop. could the housing slump lead the feds to slow the rate hike even the half point hike is starting to look dicey but retail is rallying nordstrom turning in slower results and last week's are etail route over done.
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and it was over a month ago that we saw net gas prices top $7 today it's 9 gasoline prices jumping ahead of the holiday weekend. but first dom chuis back and he has our numbers. >> good to be back on a hump dayb, no less. i've messed a lot of the market volatility the bulls will take what we're seeing today it's the mixed picture overall the dow industrials are down a modest 50 points 1/10 of 1% the s&p up six handles roughly two/tenths of 1% gained here 11,326 we'll call it stability maybe showing signs off a bottoming process. although the bears say that more volatility is yet to come. kelly mentioned the retail
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trade. she mentioned nordstrom. now,b the big reversal up 10%. and perhaps a little more optimism about the business, especially outdoor activities. despite thefact that their four-year outlook is different than they were forecasting reports show they're still interested in the company. and by extension, the entire retail trade up 8% ralph lauren up 18.fife% and the best performing sector, the s&p. and one other one tied to the consumer spending, wendy's up about 10% right now. and looking to be a more axive participant. wendy's shares up about 10% on that bit of news they're still down a quarter of its value. keep an eye on the wendy's shares everything we spend our money on maybe a it's a sign.
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we'll see how things pan out this froop >> thank you very much r the era of lazy investing is over no longer can you just ride the latest miami stock bandwagon the next guest is doing exactly that looking for companies uniquely poised to benefit in this environment, with which he says is not a slam dunk for recession. joining me is chief financial officer at center stone investors. how important is it to you it's important and they would look at it as causing spiking unemployment that is important for anyone at the stock market that's an event that takes down everything so we are concerned like anybody
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else and everyone by now knows the odds of a soft landing and ministry and all that. so, we're looking at things as everyone else is the ingredients are in place the past, the catalyst has been the oil price spike. and we hatd that earlier this year as of now, it's not baked in the cake or not set in stone. >> well with get to a couple of your names in a moment maybe energy is an area you think is investable right now. how does that factor in at a time when it's already performed so strongly this year and yet a lot of the energy prices show no signs of slowing down. >> with all the events administration boeing persoved
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for prospects. i'm of the view that, boy the end of the summer, the bidened a min export ban on oil and figure out how to do it for product prices that's the one element where, like i said, ingredients are in place for recession. but this is a lever they can try to pull that would almost have the price of diesel and jet fuel and adjusting prices to sell and ne'er tempted to do that by the summer that band that wads lifted eight years ageor something like that. for most of the 30 years, we hatd a ban on crude oil and exports. duck tailed environmental goals. because doing something like
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that would have them just like gas, natural gas that's two different proices in the u.s. and oil would turn into something like that to are that creates uncertainty when we're investing in the oil space. if nothing happens, oil price trajectory will go higher. however, that will be enough to tip a global economy into recession. i'm increasingly thinking that we will see a change in this export ban that was lifted a few years age. >> and base chae think political risk is the biggest risk as we do see a clampdown on exports and that sort of thing let's get to a couple of the names you think offer compelling opportunity right now. >> i mean, when i'm lacking a at a stock, i'm trying to figure
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out what's outside of the box? where do yi have to not worry about what is u.s. trade policy going to be like what is u.s. policy going to be like towards oil and gas and come mg ing into a handful o companies we've been investing for a long time. i don't want to be part of the conversation i want businesses that have the ability to do well regardless. they're driven by internal decision making, rather than the external factor. the largest manufacturer of generic consumer drugs, perrigo. it would be like tylenol or amazon and they're going through a whole post covid normalization
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back to normal the business getting back to normal and by the second half of the kroerb, the major cost hurdle and many other companies, which is cost of transportation, that's lacking last year's cost increases. you have margin expansion at the back half of this year and into next year. another example is a company like ubi soft, a video game producer this company went through three years of investment that depressed their result and sentiment. all with covid essentially, there's a lot of apathy towards the company but they're exiting the investment phase and entering the next few years with a bunch of brand new games where investments are trailing off noogter of the companies am i going what's the biden administration going to do with oil prices china? and are they going to -- the
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u.s. government has figured out they have is a new shiny tool, influence through the tregs department and trade blockades most is populated by these type of things. that's why we're value investors. >> and your stock picks today, is much about what you're not picking as what you are. thanks for rejoining us. >> thanks. >> with center stone meantime, the weekly mortgagenics showing another drop with purchase applications down from a year ago this on top of yesterday's massive drop in new home sales and comments from home builder, toll brothers, with that they've seen a softening in demand in weeks. dianna is here with me now to break down just how we got
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there. >> and it seems like we were talking about this crazy competition in the housing market builder sentiment dropped dramatically and for existing homes, we spoke to the seller in this home in l.a. and they're already worried they would not get top dollar. >> we talked about that a lot. are we making a mistake? are we missing the boat? is everything going to crash in the next through months and wore going to kick ourselves for not selling the house earlier this year >> gone are the days of 10 or 20 offers now one or two why? affordability, straight up so, in may of 2019 with 20% down on a three-year fixed, the monthly payment $1192. in 2020, that same house was 5%
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more expensive so, the monthly payment dropped. by 2021, home prices were surging up 15% but rates dropped further. the monthly payment only up $100 prices up another 21%. the monthly payment is now almost $800 more than it was in 2019 and for a lot of first-time buyers, that's a nonstarter and for move-up buyers, with it's definitely taking the heat out of demand. >> we'll explore this more with our guests in a moment but is the market going to crash like we saw in 2006/2007? or are we likely to tread water at this plateau? >> we're not going to crash the way we with were because that was all about bad mortgage underwriting and these rates that would adjust when home
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owners couldn't afford it and when prices were underwater, they had no way out. >> do you pick up on any more creative financing problems that could crop up now in response? >> you talked about the mortgage lenders how they have no reify business and they're losing the purchase business. so, are they if wing to start to drop some of the standards a little bit perhaps we're already seeing more demand for adjustable rate mortgages. perhaps but not 2007 and 2008. >> thank you veryb, very much. the cooling housing market is casting a a shadow over the economy, so much so that my next guest think as half point hike is off the table in september and might be dropped to 25 basis points in july as well let's bring in ian shepherdson
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the chief economist at pantheon. likely to be as hawkish as fed officials themselves were six weeks ago. deyou thinks have already changed pretty dramatically? >> i think they have is changed. i don't quite know why they're so astonished because mortgage applications have been falling for months markets seem surprised boy it. it's got further to go for sure. and i think it does significantly increase the chance that the fed steps back from another 50 in july. and i've never really bought the idea of 15 in september. i'm quite happy to stick with 25 this is a potential for a rethink. it's not that the inflation story has suddenly gone away it hasn't. it's more a combination of really sharp downturn in housing
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market activity. the potential for a down shift on the back of the latest disruptions in china and from the fed's perspective, maybe a softening in wage growth as a well you put the three together and do we really need to do 30 -- >> signs of spreading from goods to services, inflation expectations on the rise worries about it feeding through to wages do you think they've moved in the direction they've wanted to see financial conditions and the economy move and this housing reset being part of that >> they certainly needed financial conditions to be tied. we saw that with record stock prices and record zero that was clearly inappropriate and i think they've achieved some of the things they wanted and been helped boy the
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moderation in wage growth over the last few months. if it continues and it's not guaranteed the survey suggests it's a real thingb with not a fluke. by the second of the year, it does give us more room to maneuver they need rates more like neutral. but it's not so clear gm kbm that they need to keep going, hammering away at the 50, 50, 50 the shock in the housing market is quite profound. rates have dropped and shown no signs of stopping. we're going to see weak housing data through the summer at least. and it maybe time for a reset of the pace of the rate hikes will be appropriate the law of unintended consequences kicks in. you never know what's going to
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happen with the dollar or expectations or credit spread. what's happened is a significant tightening and we're hearing it from some of the corporates, earnings numbers and guide ps. and maybe in that environmentb with they don't need to be quite so aggressive. >> has it been enough taso spura recession? >> no. i don't think so no apart from housing, the consumer is charging along. we have real time data from google, a strong ability is still trending upwards strong data from restaurants, airlines, the hotel sector pretty much everything but housing is doing pretty great. and looks to me like consumption is going to be 4% plus, despite the soaring gas prices people are druing down some of the pandemic savings they've accumulated. that's allowing them to cushion
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the blow and carry on with their post pandemic back to normal spending the consumer is nearly 70% of gdp. and right now the only thing that's weakening is housing and it's doing it quickly. >> thanks for coming back. it's good to see you today quick programming note san francisco fed president will join me tomorrow at 1:00 eastern. we'll get her thoughts on the housing market, rate hike and more and who are the winners and losers in this new retail economy? our next guest husband a shopping guide as the group tries to avoid the 10th straight week in losses nvidia, snowflake all 50% off their highs.
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consumer now trading behavior from nordstrom and dick's sporting goods. and these two retailers are reporting tomorrow morning grirlts to have you and you're togging about the dollar retai retailersb, is that right? >> dollar tree, dollar general the next round starts tomorrow big stakes because this is the potential tip of the iceberg why we've seen such big reaction from retail in the last two weeks is because the market's afraid the low is beginning to crack and that will press edge a slowdown from the middle to low to the high end. >> anything you're picking up in the way you're surveying the wins >> this tentative on a dollar
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name, the stores would bebeneficiaries of trade down. we don't know if that's happening quite yet. they begin to see weaker demand before you see the benefit of trade down the other theme into this year is you have higher cost of doing business both higher wages. transportation costs we're afraid of that and what happens to lower income consume soer spending. benefitted greatly from stimulus is and this year we thoughts thereber big head winds given the hack of a stimulus >> what's the most bullish thing they could say >> no trading down from the core customer and at the level of discretionary spend they saw in the first quarter held up verses last year. i would say the lower income consumer is bucking the macro trend. and frankliall matter and target
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admitted they were seeing. >> i think we all would have felt better about the impact on freight if they didn't talk about the price sensitivity among the talker >> the consumer is hanging in. there's been no real eddington in demand yet. inflation is halts holding up total sales growth but they're not cutting because demand is falling off. it was looking around the corner to say things could get worse. costs are higher than expected some inventory is coming in dramatically and that's causing people to mark things down we're keeping the glue together but because we're laughingb, the unprecedented demand is hard to disprove that things won't continue to get worse.
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>> and a macro basis, he sees the consoumer hanging in there what did dick's sporting goods tell you this morning when they clarified the business is still good and they urwith trying to be conservative, the shares are up. >> dick's epitmizes the classic retailer that has massive gains in covid, where the market is hard to prove what the normalized levels will be post covid. and they said we're not seeing anything but the idea is if you're short in the back half of the year, it may become difficult because if we don't see further changes, they move from a potential guidance cup position to now they may have to res have positively it changed the game, no pun intended >> hopefully they would know how and the market reaction speaks a
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lot to what may pbe taking plac. >> i still prefer scale, large company quality. walmart, defensive scale that can manage through tough environment and we like home depot. how home improvements have been cracked. big company, not as much earnings as a perceived and close in valuation as far as recessionary or bottom valuation. >> i was at a stone distributor yesterday. it's a long story but there's quite a bit of demand out there. thanks so much simian gutman from morgan stanley. still ahead natural gas prices surging above $9 this is the highest level since august 2008. and gasoline prices above $7 a gallon in some parts of the country. we'll look at the future for energy stocks and discretionary plays.
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plus this stock up 12%, not because of earnings. y with have the name and what's driving the gains next let's take a look at the dow heat map this hour amex, home depot a cvrndheon are your biggest gainers we'll be back in a moment. so you know all you need for recovery. and you are? i'm an invesco qqq, a fund that gives me access to... nasdaq 100 innovations like... wearable training optimization tech. uh, how long are you... i'm done. i'm okay.
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welcome back to "the exchange" everybody. the dow overall was up about 200 points with the highs. the s&p hanging on to a 5-point gain that's the leadership. odd bed fellows in terms of sect issers
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we have both consumer discretionary and energy in the green. technology trying to join that as well. let's take a quick look across mega cap tech names with alphabet, amazon and tesla tesla in particular is rebounding 5.5% to 662 appleal is negative by almost unwith%. still hovering around 139. kohl's is surging on reports that bidders are likely to make offers cnbc learning that simon property group, the biggest u.s. mall manager, is not planning to make a bid elsewhere, aber kraumby and finch and check out shares of
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valvoline. coming up, what to nvidia, snowflake and splungo have in common they all report after the bell today. we have the action,b the story and trade in earnings exchange next
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governor greg abbott is holding a news conference on the elementary school shooting in texas. >> all texans are grieving the people and people are rightfully angry. about what has happened. but they tear at the fabric of a community. our job is to insure that the community is not going to be ripped apart all texans must come together in support the families who have been effected by this horrific tragedy. hot they need now more than ever is our love. what they need is uplifting. from all of our fellow texans
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and all of our fellow americans. and let me emphasize something that i know you all know but the reality is, as horrible as what happened, it could have been worse the reason it was not worse is because law enforcement officials did what they do they showed amazing courage boy running toward gunfire for the singular purpose of trying to save lives and it is a fact that because of their quick response getting on the scene, and eliminate the gunman, they were able to save lives.
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unfortunately, not enough. but i want to make sure that everybody knows all of the law enforcement agencies and groups involved and were involved in this process, the texas rangers are leading the investigation and they're supported by the texas department of public safety highway patrol, investigative division dps aircraft intelligence counterand terrorism division dps crime and victim support they're also supported by the texas division of emergency management the fbi as well as multiple federalal partners, including the eta and border patrol. and the valiant local officials.
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the uvalde sheriff's department, police department, uvalde independent school district police uvalde mayor, the county judge, district attorney's office, local public works and surrounding police department. and the san antonio police and fire department also let me walk you through some of the facts of what has happened there's been a lot of things that's been said some are correct, some incorrect. let me tell you the best information we have at this time, understanding importantly, that this is an ongoing investigate and they often reveal new informations as those investigations progresses. the first thing that happened was the gunman shot his grandmother in the face.
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she then contacted police. the gunman fled and, as he was fleeing, had an accident outside of the elementary school and he ran into the school. officers with the consolidated independent school district approached the gunman and engaged with the gunman at that time he then entered a back door and went down two short hallways and into a classroom on the left-hand side the gunman entered to the classroom and it was connected internally to another classroom. border patrol consolidated isd officers, police, sheriffs and bps officers converged on that classroom and a border patrol officer killed the gunman. as i said, texas rangers are leading the investigation joined by federal, state and local law enforcement officials.
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at this time, we know that 19 children, 19 children have lost their lives. two faculty members lost their lives. in addition to that, there are 17 people who are injured but their injuries are not life threatening. all the family members of these students and faculty members have been contacted and informed about the circumstances. officials are working with parents to insure they're going to be able to see their children parents should contact victim
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serve is -- services at the county fair plex all parents are welcome and urged to contact victim services at the county fair plex. the gunman was 18 years old and is reportedly a high school dropout. reportedly there has been no criminal history identified yet. he may have had a juvenile record but that yet to be determined there was no known mental health history. of the gunman. he used one weapon, an ar-15, using two, 23 rounds there was no meaningful
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forewarning of this crime other than what i'm about to tell you. as of now the only information known in advance was posted by the gunman on facebook approximately 30 minutes before reaching the school. the first post was to the point of he said i'm going to shoot my grandmother. the second post was i shot my grandmother. the third post, maybe less than 15 minutes before arriving at the school, was i'm going to shoot an elementary school i mentioned that during the shootout that took place at the school, in addition to the
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students and the faculty, there were three officers who were injured who were all in good condition. one deputy sheriff lost a daughter in that school. before coming out here, we had a long discussion with law enforcement at all levels. we had a discussion with community leaders, elected officials. and i asked the sheriff and others and open ended question and got the same answer from the sheriff as well as from the mayor of uvalde. the question was what is the problem here and they were straight forward and emphatic they said we have a meant --ee have a problem with mental
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health illness in this community. and then they elaborated on the magnitude of the mental health challenges they were facing and the need for more mental health support in this region i want to make sure everybody understands the mental health serve iseses available at this time i'm going to redouble on in the aftermath. whenever anything is shocking and extraordinary and disturbing as this event is occurs, there is an urgent need for everybody a effected to access mental health i cannot be more emphatic than saying with great urgency
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everybody in this community, i n mean everybody,b the victims, the families, family members friends, the law enforcement involved, but the entire community. is in utter shock about this some physical wounds sustained boy the officers are going to heal in the coming days. the mentalal and emotional wounds are far harder to see and last far longer. the state of texas working with federal and local officials and agencies we're going to be here for a longb, long time and one key point that we will focus on is making sure that everybody in this community has the access they need for as long as they need it.
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to address what the mentala and emotional health care needs that they have. i want to list various agencies and make sure these are made available to the public. the mental health services are from victim services across the area, including a family resource center at the uvalde county fairplex. schools have crisis teams a that uvalde civics center they provide wrap-around services for families who are effected the texas child mental health consortium created by the state legislature in 2019 is available to assist. the blue bonnet children's advocacy center is available to
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provide services for children. the texas health and human services commission is on site and will be available for on going provision of services. the texas education agency is providing supplemental counsel services the texas department of public safety is providing counseling services for law enforcement and the fbi is also bringing in mental health services for law enforcement. it cannot beover emphasized, the importance of wlaw enforcement officers seeking out and obtaining this mental health counseling the district attorney's office for victims services has a phone number available for all victims and the entire community is a victim here. and ki was provided their numbe to give out pulicly.
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830-278-2916 and at this time, i will pass the mic to lieutenant governor dan patrick. >>. >> reporter: texas governor greg abbott addressing the horrible situation in uvalde, texas only the conformation, 19 children killed yesterday during the gunman's rampage plus two adults more than a dozen are still being treated for their injuries we did learn today from governor abbott about the facebook posts, ones we heard about but have not been confirmed by authorities.
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the first post, i'm going to shoot my grandmother and then i shot my grandmother and then i'm going to shoot an a elementary school he came in heavily armed, wearing body armor and barricaded himself inside one classroom, where it's believed all of the children killed died during that rampage. we'll have complete coverage on the news tonight for two hours live from uvalde, texas. and our correspondents who were on scene and the rest of the day here >> there will bemuch more on the program tonight. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit
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bring on today with comcast business. powering possibilities.™ ♪ ♪ >> welcome back, everybody natural gas prices absolutely soaring, climbing above $9 today. that's the first time since august of 2008 it's the highest level and nat gas has doubled over just the past three months. we all know oil is holding above $110 a barrel. still gasoline is at a record high gas is so expensive that a gallon costs more than the federal minimum wage of 7.25 the only fix is demand des
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destruction. both diskraegz and energy are outperforming and the consumer is hanging in there even with prices where they are, so at what point do we reach demand destruction? >> kelly, we're going to have to find out because we've got a tight supply/demand situation. it's a problem six years in the making and we're not going to solve it in six weeks or six months and it feels like right now we have a push/pull between the industrial consumer with diesel and the retail consumer with gasoline and you know, in the near-term people are going to travel and they'll spend whatever it takes and it feels like prices are going to be high here for a while. >> it does because we have a tight market globally. this isn't just about a supply disruption and it's about incredibly tight demand and on top of that any disruption is not helping the situation. so if we're at 110 now should we
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expect to be here now or higher for the foreseeable future >> we have china that's partial o partially out of the market and whether or not high interest rates will dampen the economy. so the answer is unless there is a significant, and i stress the word significant slowdown in the economy, 110, 190, high prices are going to be the answer and we'll see where the world is high sxeand gas is high 350 plus and it's what we'll have to get used to and what are people going to sacrifice so they can keep driving. >> if you're a new buyer of energy names is what you described bullish or bearish >> so it's bullish to an extent. too much more to the upside and you have to start wondering if that's as good as it gets. we're not as good as it gets right now. duration is the real story
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we sit here at $100 for two or three years. this sector is trading at two times cash flow, or two times cash flow and that's just too cheap. so our expectation is that we are going to see that duration of reasonable commodity prices or good commodity prices and so new money makes money, we think. >> you're a natural gas expert, dan. as we turn to that subject it doesn't make you an expert on electricity, utilities and what experts are paying their bills and that's inevitably where the discussion will be over the summer and as temperatures spike how will people feel a pinch from nat gas being over $9 so we're in the process of globalize the natural gas price. $20 in europe and it was $4 or $5 here and it's eight or nine and that will make its way through to utility bills some customers are insulated based on the type of plans that they have, but the reality is
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gas is more expensive and gas is a big chunk of our power generation here in the u.s., and we will see it flow through to utility bills and these are things that it is tough to not turn on your air conditioner demand is relatively inelastic and so the question is you will pay your utility bill, what are you not going to do? >> exactly let's get to some of your names in the industry. where should investors be looking for. the most resilient names over the next, let's call it 12-plus months >> sure. as i've said with you, a fair number of times, the first stage is you want to be invested and this is going to be a good spot to be in absolute relative performance and we like the service sector here because we think that high prices will lead to more drilling activity and so we like the oilfield service etf and the oih and one of our favorites continues to be diamondback energy and the
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permean basin and some of its peers is catch-up and the natural gas, you want to stay exposed to that and a new name for us and we like southwestern energy and this is a company that produces gas in both the east coast and the gulf coast. it's also lagged its peers and another great chance for a catch-up play. >> a quick final question and i asked at the top of the show whether he would be looking through energy right now and his concern is the political response ends in some export ban that could fall substantially. do you think the biden administration might do that and how big is the political risk especially into the midterms >> it's growing because voters don't like paying more at the pump or more with the utility bill and politicians want to appease that if they could the export ban doesn't make a sense to me and wind up trapping the commodity such as oil and that doesn't necessarily bring down gasoline prices and so to me that's misguided and the
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better response would be cut the gas tax. you can take ten or 20 cents a gallon with the gas tax that the cut revenue and it would be an immediate relief for the consumer at the pump. >> i think abe might even agree with you that might have a good effect and he nevertheless sees it as a risk as an energy investor quick final question, and it has been busy for the industry and what is aramco dealing with valvoline? >> what it says is this industry had a near-death experience and we're now flush with cash across the industry when you've got a lot of money or thinking about how you leverage the images and whether it's aramco, valvoline or other m & a throughout the sector and i think you'll start to see companies whether they're state owned or public companies play offense and so i think we'll see more of these kinds of potential
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combinations over the next 18 months >> maybe another bullish catalyst for some of these names is if they needed one right now. dan, thanks for your type. appreciate it. >> dan pickering with pickering energy partners. we have big headlines from the fed coming up at the top of the hour with the release of the minutes and the s&p and nasdaq are higher and i'll join tyler with that and more on "power lunch" on the other side of this break. i'm an invesco qqq, a fund that gives me access to... nasdaq 100 innovations like... wearable training optimization tech. uh, how long are you... i'm done. i'm okay.
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♪ ♪ good afternoon, everybody. we have breaking news to begin "power lunch." the minutes of the last federal reserve meeting are out. let's get right to steve liesman in washington. steve? >> tyler, thanks very much the minutes showed the participants of the fed meeting in may agreed that they should move expeditiously toward neutral. likely appropriate at the next couple of meetings that meant the meeting they raised 50 at plus a couple more and this is the line that stood out for me


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