tv The Exchange CNBC July 2, 2021 1:00pm-2:01pm EDT
services this is everything you want to be at. from mortgages to personal loans, you take that pick. shannon? >> mondelez. great way to get sector. >> raytheon, 2.5% dividend jim. >> qualcomm. >> like it, jim. there you go thank you, everybody that's it for "halftime report." have a great long weekend. happy fourth of july, everybody. "the exchange" with new record highs begins now you're welcome, kelly. >> thank you, brian. i'm kelly evans. hi everybody, and welcome to the exchange 850,000 new jobs and wages on the rise so, why are bond yields falling again on this great jobs report? we will tell you why and look at the stocks that could hurt if wages continue their climb plus it's branson versus
bezos in the space race. richard brans son is set to be aboard a flight next sunday. the stock soaring or landing in the stars. is it the best time for bezos to step away as ceo of amazon it's all coming up in rapid fire but we begin with the stock reaction to today's jobs report. christi kristina partsinevelos has those numbers. >> the russell that you're seeing on your screen down almost 1% is the only major index lower for the week we know kelly will get into the bond yields. growth taking charge after trailing slightly over the past two business days. so, tech is the leader on the board, up 1% that's primarily due to software consumer staples led by hbc and grocers. last but not communications services- i always say consumer that's up on gains that's primarily because of
alphabet rents of google, that stock is climbing higher. you have bernstein up 2%. bernstein named google or alphabet the tech giant or the top pick in the second half. we're talking about valuation though and we just got breaking news just within the past hour. the federal trade commission is charging broadcom with illegal month knopp zags specifically for chips in television and broad band services. the ftc stating, quote, america has a monopoly problem broadband not even a look down >> communication services is too many syllables >> i think i said community services communications services. i don't know >> it needs a new name >> sorry the june employment report stronger than expected with most of the gains in leisure and hospitality. as the reopening gathers strength, in fact bank of america reported a 19% jump in credit card spending over a two-year period for the
weekending june 26th most of this increased spending is going to travel entertainment and dining out bear that out. is it full speed ahead for the reopening or could covid spoil the rebound. joining me now is michelle meyer, head of u.s. economics. michelle, it's great to have you here and i think that, you know, just as we're getting to a breakout point in the labor market and the economy, do you think there's any signs yet of this delta variant slowing things down, or do you think the economy is going to move past it and move through it and not be phased this time around? >> yeah. hey, kelly so, you know, i think so far the answer is no, not really i mean, certainly not in the data flow. what we're seeing is pretty extraordinary pace of activity in all things services activity. so, you know, travel, restaurants, entertainment consumers are out engaging they're spending and those businesses are trying to ramp up to accommodate such
strong demand. and that's what we're seeing in the data car data showing the spending and the labor market showing businesses trying to expand. and there's still more room to go as you know, the risk is, of course, there could be some pullback if the delta variant creates a turn higher in virus cases, which ultimately leads to hospitalizations, which gets consumers to change their behavior so, that is an outstanding risk. but at the moment it's not showing up in the data flow. so, let's talk about the strength in the economy, the strength in the market and the fact that bond yields are dropping a lot of people say it's because the labor market is showing hospitality. the hardest hit sectors are catching up to everybody else. they're saying that means the fed is going to taper and that tightening is flattening the yield curve. do you think that makes sense? >> i think we have to consider the two levers that the fed pulls quite differently. yes, i think the fed is setting up to taper. they're making progress on the
labor market the inflation data looks clearly a lot stronger and they've been laying the groundwork for tapering. so, our sense is they will go ahead and announce the plan in september. shortly after that, they'll go ahead and taper. but even if they taper, even if they scale back on asset purchases, they're still going to be actively engaged in the markets in terms of expanding their balance sheet, likely until the fall of next year. in an economy that will have closed the output gap and already start overheating. so, it's still a very accommodative federal reserve, even with the steps towards tapering and the other lever, interest rate hikes that i think they're still far from pulling our sense is that we're looking at 2023, second half of 2023 before the fed feels comfortable starting to hike interest rates. that's where i think the bond market is a little bit unsettled. they can kind of price in the taper, but the hiking, you know, seems to be the sense of pull forward rate hikes i don't think the fed is giving
any indication that's the sense. >> i've been surprised at some of the hawkish rhetoric we've heard from fed officials since the last meeting if they were concerned the market saw the dots and reacted too hawkishly, they've had the chance to walk that back why do you think this is is this very drop in bond yields what the fed wants >> look, we have a divided committee. the federal reserve is not all united in terms of this new framework and how to implement that new framework and you have a number of hawks that have been vocal several officials were looking for hikes to start in 2022 and they've been on the tapes talking about the rationale for that but you have a large part of the committee, particularly the core of the committee, that we believe is still highly committed to the new framework and making sure they generate an average of 2% inflation, broad based labor market recovery, all the things they've been talking about, which by the way they're establishing and they will want to continue to accomplish that and they don't want to short
circuit the recovery by talking hawkishly or looking towards higher interest rates. i think part of the challenge is there is a divided committee and that makes it difficult for communication. in terms of what the fed wants, to your point kelly, about the interest rates, i don't think the fed wants the market to be pulling forward rate hikes i don't think the fed wants the markets to be doubting their commitment to higher inflation and that will be something they'll have to reset and hope that the data allows them to adjust market expectations on that front >> so interesting. all right. we will continue the chat now. michelle, thank you very, very much for setting that up for us. mic michelle meyer with bank of america. the nasdaq and s&p 500 are hitting record highs again so, let's talk about the drop in bond yields, the flatter yield curve and whether this is what the fed wants. joining me the president of securities and national securities welcome to both of you
i'll begin with you because i think michelle just spoke of a divided fed. i think if you were on the fed you would on the side of the hawks. so, you know, what changed streaks? for years we were talking to you about interest rates potentially plunging and ten-year almost going to zero. now your concern is on the flip side of things, right? >> kelly, for so many years i was looking at the bond yields going down because i didn't see inflation pick up, despite the trump tax cuts and i didn't expect growth to pick up to a significant extent. and that was going against the consensus. that's how it worked out with the 10-year yield going below 2% and going well below even 150. what changed was at the beginning of this year when we had the runoff elections for georgia giving all the advances of government in the democratic hands with a lot of increase in
spending coming. at the same time, you have a closed working relationship between chairman powell and treasury secretary yellen, which again is going to make for a significant monetary expansion so, price increases go from the transitory phase to a permanent phase, kelly, only with the oxygen provided to them by continued money growth and that is going to come. it is not going to go away any time soon. second, the fed has no more foresight into whether the station is transitory or permanent than those of us have on the market side and they are, i think, looking for a much delay of cutback, if at all and why are bond yields falling? because for last 10 or 11 years we have had a very benign inflation environment. for the last three decades, we have had a bond rally. so, the market says we are not
going to give up on that they believe in the chairman >> okay. >> you will see them and that's the problem here. >> art, why do you think bond yields are acting the way they are? and to put it differently for investors, we were speak yesterday about a cnbc survey showing the financials for the preferred investments for the back half of the year. in there is the expectation that interest rates are going to rise when people come on and say yes, we like the financials we think the rates are going up to 2% and so forth there is so much that depends on whether that is true this time or not why do you think yields are where they are >> i think a couple reasons. i think if you look at the demographic of the u.s. population, you've got a lot of people that are forced into the low yielding u.s. 10-year, right? so, fixed income market is driven by the second largest population in the united states. secondly, if you look at the end of the first quarter, japan became a net buyer of u.s. treasuries after being a net seller for the better part of six months i think that's another dynamic that's going on.
and i think it's the fed's communication strategies, talking about the fact that they are eventually going to get to a place where they're going to start tapering i think michelle is right. i think they announced this in september. remember if that balance sheet -- let's say they complete this taper, a 12-month period that balance sheet is going to remain active. reinvesting the runoff and i think that's what's kept the action and the u.s. 10-year at bay and i also think it is because we're starting to see rollover in commodity prices. when you start being hyperconcerned about inflation and lumber all of a sudden is down 30% from its peak you're seeing a rollover in copper and iron ore. i think that's the supply response we're waiting on. i think the same thing is true for things like wages. if you get a month-over-month numbers in the report, there's deceleration in wages and i think that continues >> you're almost making e
argument for the growth. the value trade is wages are going to go up the commodity prices are going up you like financials. you like energy. you like industrials and materials. why do you like these sectors, even if you're describing it as transitory >> that's such a great question, kelly. i think you can have both. we would like to have a barbell approach we want you to have growth on one side of that and express that in thematic ideas like cloud security on the other side we want you to have exposure to cyclicals we think the economy is improving. we think the siically calty will be with us throughout the course of the year. if you go back to the march 2020 lows of last year and track, they're almost exactly the same. they just had six-month rotations. the first six months was all about growth the next months was about being cyclical this year has been a mirror image of that. we're seeing the same kind of action we have these rotations and i think that will contin for the
year so, you want to save balance >> so, as we go, you would be a seller of treasuries here. what do you think the next stop is for yields? >> my expectation is that the treasury yields are headed up. the question is not knowing exactly when that is going to happen you may have a situation with three, four months of high inflation as we approach the fourth quarter the markets may say that's enough, we are not going to trust the fed anymore, and that is going to cause them to go up. and in the end, sullivan said very well in the hour before, kelly, you have the opec meeting right now. and within the next couple of hours we may find out if oil production is going to stay fixed because they can't reach an agreement and if you have oil prices rise from $75 to $100 in quick session, everybody then will say inflation is going to be permanent and bond yields surge as a result of that. >> we'll see all right. gentlemen, thank you for joining
me on this friday. meanwhile, check out shares of didi moving lower today after china announced a cyber security review of the public company didi says it plans to fully cooperate during the review but the shares are down more than 8% they priced at 17. they're trading just under 15 right now. eunice has the latest on this story. >> thanks, kelly tech folks tonight are thriving this investigation as coming out of left field. the cyber security regulator -- the cyber regulator in a short online said the review was meant to guard against national data security risks, uphold public interests and protect national security it's that last point that is really being interpreted here as a serious one because the government cited the national security law so, it made that effort. now, during the probe, didi will be barred from registering new users.
and in the short-term, this is being viewed as not particularly material for the business because didi already has 90% of the ride hailing market. however, if the investigation continues to drag on, then it could potentially weigh on the business now, the big question that people have here is about the timing of this announcement because in the short statement, the government didn't explain what the motivations are but there's been a lot of buzz that this could potentially because beijing was unhappy with the fact that the ipo was timed right around the 100th anniversary and the celebrations of the communist party's founding so, this could potentially be a political play and, you know, given that it's china, not necessarily something that would be -- something that
you wouldn't see here, kelly >> eunice, what do you think is the next move here it often feels any time a chinese company is in the spotlight, the leadership finds a way of saying, just so everyone is clear, you report to us >> yeah, that's right. the backdrop of all this is there is a crackdown going on where the government has been targeting china's big tech a lot of that from beijing's perspective. and their explanation is because they want to be able to protect consumers' data. you know, didi has been collecting a mobility data in real time here in china as well as potentially overseas. so, because of that, this could be just part of that sweep now, i also heard another theory that was a little interesting. and then that is that potentially beijing wants to really show case that chinese data might not be safe from the u.s. now that didi has been
listed in the united states. and so this could be a way to message back home some of the issues that -- the larger geopolitical fight that the u.s. and china are having over data and reciprocity. >> speculation is often the only choice we have with moves like this and announcements like these. we really appreciate your reporting. back at home, ibm stock is moving lower as the company announced the president will step down. shares are around 4.5% >> they actually moved lower after we had our report this morning that this had been announced. i was able to get on the phone and get context here and certainly clarified the way i think about it now, jim whitehurst as in a sense been in this position for three years. you know how these contract things work. when somebody comes on board in that period of time. he was named ceo he's since been named chairman and has been putting leadership
in place whitehurst a very well regarded executive. he could be a ceo in a lot of places he has options on what he wants to do. and there are things that jim wants to do. but he is going to spend a year now as an adviser, said that jim's been incredibly gracious and effective over the past three years and said that he would have been glad for jim whitehurst to stay as well this is important where red hat is concerned some people might worry, does this mean something is afoot with red hat paul kor mere, who's been running red hat as ceo, 20 year veteran of that company, now part of ibm, he is staying he's not going anywhere. and the work within ibm, with red hat continues go on a pace and then with the other executive changes, i asked him to describe what he was going for there. and he talked about how this group is execution focused, operationally intense and
technologically led in go-to-market in that sales motion sometimes you don't always have somebody who's an engineer who's technologically minded in a sales role but if you look at rob thomas, who is in the head go-to-market role, very much somebody who's been leading technology. that is ibm's perspective of what has happened. >> these shares are a little bit off the lows as you described this the company splitting up soon, isn't it >> yes, it is. and to -- i'm forgetting right now the name that they chose it's a very unique name for the unit that they're spending on. but that is happening. we're continuing to see this transformation where we're keeping core ibm focus on hybrid cloud, more nimble, more technologically led. investors tend to like that, when somebody who is technical is leading not just in the engineering but also in the go-to-market when you're in a battle with technologically-led
companies like amazon, like google, et cetera. >> i think for the company split took a lot of people maybe even internally by surprise and this announcement maybe adds to the anxiety around the direction. so, perhaps explaining here's the vision and here's how this all fits into it >> i was not surprised by the company split. >> oh. >> ibm is big, right >> are they going to stay in the dow. >> that i don't know that's not my area i'm more of a tech guy but when you've got areas that are faster growing, we see this all the time areas that are faster growing but perhaps lower revenue, higher margin, you want to highlight those. you start thinking are there older businesses that are perhaps slower growth with different models that we can put to the side so investors can see more of what we want to highlight. >> fair enough ibm shares down about 4.3% on all this news today. we'll see you again in a moment for rapid fire jon fortt with the latest on big blue coming up the billionaire space race is coming down to the wire with virgin galactic
announcing that branson will join its next space flight next sunday virgin shares are jumping on the news, though well off the session highs. we'll bring you the details on the long-awaited trip and what it means as the billionaires battle to be first we're back in a moment this is andy, my schwab financial consultant. here's andy listening to my goals and making plans. this is us talking tax-smart investing, managing risk, and all the ways schwab can help me invest. this is andy reminding me how i can keep my investing costs low and that there's no fee to work with him. here's me learning about schwab's satisfaction guarantee. accountability, i like it. so, yeah. andy and i made a good plan. find your own andy at schwab. a modern approach to wealth management.
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welcome back shares of virgin galactic are giving up a lot of their gains today after the company announced its founder, sir richard branson, is joining the crew on the next space flight test on july 11th. that's next sunday morgan brendan spoke with virgin galactic's ceo this morning and joins us with the latest morgan >> what a week it's been, right kelly? a mission specialist on board the vss in the cabin to test out the experience that will be the job of sir richard branson, plus his three crew mates now, given the fact that branson was supposed on board not this test flight but the nearly identical one behind it. so, since jeff bezos is flying
nine days later, i'm asking how this game plan materialized. >> we originally thought we would maybe rehearse and have somebody stand in for richard just to kind of show what would be going on. we realized most of that training is done on the ground so, we had a chance to say to richard, you could go on either of these two flights which would you prefer you can imagine what he had to say back and he's excited to go now that it's ready. >> the bezos launch plans had nothing to do with this, quote, absolutely not quote, we only fly when we've assessed all of the data and we are safe to fly and ready to fly. and getting that as virgin galactic shifts from technical tests after that successful may flight to ones that are now with this focused on the customer experience so, who better than branson to represent those future astronauts, including this trip we've got three more flights until the launch of special
space for virgin galactic. so, if all goes according to plan, saying today that ticket sales are poised to open back up as soon as later this summer and of course for the investors in this stock, that is going to be a key financial moment, especially given the fact that we've seen these shares run up so dramatically, and this is still very much a pre-revenue company. >> blue origin is saying it's going to go higher than the astronaut line or what have you? >> oh, yeah. that's been -- we're getting real space nerdy here. that's been one of the things that's been going on back and forth between these companies. they're both suborbital space companies. they're both competing for future customers there's different processes here, not only in terms of when they launch and how long flights are, but how high they go. blue origin goes above the carmen line, which is the start
of space virgin galactic is just below it which is caused the astronaut line it is recognized by the u.s. to get your u.s. astronaut wings. differences there in terms of altitudes. i have a feeling we're not done with those debates either. both of those companies going back and forth about those details. a little space shade as i've been say >> absolutely, absolutely. making twitter fun again morgan, we really appreciate it. we're going to take a quick break. but coming up lords town shares are sinking after an s.e.c. inquiry. we've got the latest plus we'll look at the stocks mosexsed t poto rising waejs. stay with us
welcome back to the exchange here's a check on markets. as we head into the long weekend, we are seeing a rally with the dow just 30 points off the session highs. it's a slight laggard. the s&p and nasdaq are up .6% right now. lords town down 10% on the doj, the department of justice probe. they're facing an inquiry by the s.e.c. regarding claims they misled investors for more on the problems that are plaguing lords town, let's bring in phillip gold for the latest what do we know, phil? >> we've confirmed that the
department of justice is investigating lordstown motors the investigation is being han handled out of the doj's manhattan office we don't know exactly what they're investigating, but it likely revolves around claims made by prior executives about orders about the vehicle that is at front and center with lordstown motors it's this vehicle right here that's the plan for lordstown motors in northeast ohio that is the endurance electric pickup truck, early models being built. there it is, a prototype we've seen driven around a few times the lordstown motors when we reached out to them, do you have a comment on this investigation? it said lordstown motors is committed to operating with any regulatory or governmental investigations and inquiries we look forward to closing this chapter so that our new leadership and entire dedicated team can focus solely on
producing the first and best full-size all electric pickup truck, the lordstown endurance it's a little over two weeks ago that steve burns, who was the ceo of lordstown motors, one of the architects of putting this company together, was let go in part because of inaccuracies regarding statements made about orders or pre-orders for the endurance pickup truck back in march he acknowledged to us on cnbc that some of the statements about orders weren't orders for the truck they were order indications of interest by perspective buyers, but certainly not firm orders. and that's at the heart of the s.e.c. investigation as well take a look at shares of lordstown motors over the last three months, remember they not only have the doj investigation that they're dealing with as well as the s.e.c. investigation. so, more questions surrounding lordstown. kelly? >> phil, thank you very much shares of disney are also on the move right now let's bring in julia boorstin.
what's happening >> disney shares are moving lower on a report in the information that says that disney plus u.s. growth slowed sharply in the first half of 2021 this report citing internal data just want to look at disney shares down about 1% this report says that disney plus had a little bit more than 110 million total subscribers late in disney's third fiscal quarter. that's up from 104 million that the company reported for the quarter ending april 3rd so, this is on a report, and they do say in this information report that most of the grow was in india and latin america and that's where the service has more recently rolled out so, we have not heard back from disney on this we reached out to them for comment. disney does report its official numbers and quarterly results, which are due out at the beginning of august. back to you. >> julia boorsen with the disney news let's get to rahel solomon
we begin in nashville where a black family is outraged over a police officer plea deal the police officer is pleading guilty to manslaughter and will get a three-year sentence. russia is reporting another record daily death toll from the pandemic 679 covid deaths were confirmed today. it's the fourth daily record in a row. daily new infections have more than doubled over the last month. and india confirming more than 400,000 coronavirus deaths since faang began. it's now only the third country to reach that mark and on a far happier note, americans hitting the roads and taking to the skies for independence day 48 million americans are expected to travel that makes for the second busiest july 4th weekend ever. and tonight on "the news" i'm going to be filling in for shep and we're going to have reports from around the country on the rise in travel, what has changed
and how to prepare kelly, i guarantee it's going to be a great show. lots of news jam packed, i can assure you i'll send it back to you >> it's hard to tease yourself that was excellent rahel, thank you very, very much in the meantime, uber ups perks, gm goes for lithium and jeff bezosasda lt y as ceo it's coming up in rapid fire right after this here. new aspercreme arthritis. full prescription-strength? reduces inflammation? thank the gods. don't thank them too soon. kick pain in the aspercreme. knowing he'll be okay. goes a long way. this is financial security. and lincoln financial solutions will help you get there as you plan, protect and retire. two out of three guys experience hair loss by the age 35. kind of scary. that's why i use keeps. keeps offers clinically proven treatment, and the sooner you
welcome back let's put the rapid in rapid fire, catch you up on stories you need to know about jon fortt, michael sein toely companies are still complaining of labor shortages, including uber they had 22% fewer drivers from last year, contributing to 27% increase in fares. they're trying to hire more, offering more training and incentive programs through $250 million driver incentive stimulus fund. the stock is still struggling because the troubles it might have had with structure are exacerbated by the worker shortage >> the economics keep changing and it's baffling to me. you've got the food delivery
stuff which was booming. they didn't have to have too many troubles there, but moving people is different. and the incentives they have to give to get drivers on the road. i'm trying to figure out, they stop the surge pay, they're still doing surge pricing. you've got looming regulation. i don't know what the economics are going to be in two years >> what do you think, michael? >> it's just a good test of how elastic demand is for uber rides. also i think a reminder that these are the businesses that were born of a period in this economy of slack, right? you only drive your car 5% of the time why not share it you work on the side all that kind of stuff is being put to the test in a company that is only just now trying to plow toward a break even now financial. >> you're writing my newsletter for me i steal your best ideas and write them up. kate, what do you have >> we're certainly playing more, but part of the frustration is coming from drivers. driver pay isn't necessarily linked to what the riders are
paying uber and lyft decoupled that it's not necessarily reflecting the multiples that the riders are paying i was in an uber and the driver asked, do you mind what we're paying for this ride we were having a conversation about surge pricing and i was paying way more. we were trying to do the math. there's not a lot of visibility into what the drivers are making this is a brand-new driver, and she said, wow, i thought i would be making a ton more you're paying $80 for this ride. i'm only making x amount riders are confused about how much they'll be making and the consistency of what they'll make in a week. >> i've seen some of these drivers wondering or speculating if uber is charging riders more, pocketing the difference and not paying it out the way -- this has become a big sort of talking point. >> the reason it's structured this way is because it was supposed to protect them on the down side. riders are complaining these are too cheap, i need to make at
least x amount of money. they said, okay, we're going to pay you by time and distance okay great. now that things are surging and the prices are high, they want the upside so, hey, it's tough to be uber >> this is very interesting. i do want to get to this general motors story, kate gm is looking to solve one of the biggest concerns about electric vehicles by sourcing u.s. lithium production and investment in a company called controlled thermal resources they're hoping will domestically produce lithium in the next couple of years. kate rooney, is it going to work >> this definitely says something about them wanting to own the supply chain they want their own source material, getting ahead of the idea that people care about the carbon footprint it's a multi-year deal they say if this whole extraction process bears fruit, i think there is some uncertainty on whether this will work and fruit bearing as they put it so, too soon to tell for gm.
>> what? what, jon, what? >> speaking of risks to the a model, mining lithium in the united states. you think it matter what is political party is in power? i don't know, maybe. >> along with local parties, environmental concerns, all the rest of it kind of in this vein of just a quick comment that bitcoin mining has become a little bit easier to do after the china crackdown because people have gone to less power or cheaper power sources. and the bitcoin miners are flying do you think it's a one-time move >> yeah, exactly speaking of buying, this goes back to the china reaction and shutting down miners the bitcoin network itself lost half of what's known as a hash ri that's the computing power it takes to mine bitcoin. that makes it easier there's less competition so, the difficulty dropped there are some estimates that say it was down about 27%, which would be the largest drop ever so, it doesn't really affect the price of bitcoin but for the minors, the
economics are way better we were just in texas talking to today ton of miners, and they were saying this probably doesn't affect the price but it's great for us. now it will be interesting to see where these miners move after the fact >> there's this debate about whether you buy gold with the gold miners or crypto with the crypto miners. i do want to talk amazon before we go. jeff bezos last day as ceo now, the best stock ever is that amazon stocks are up 231,000% since the ipo. a quick note about the era that's about to begin? >> almost unthinkable in terms of the welt accumulation over that period of time. what's fascinating to me about this handoff in a way is that there is no ipo prospectus more studied that the 1997 amazon prospectus there's no kind of statements of principle by any founder ceo i don't think in the current age that's been studied more closely
than jeff bezos. in other words, if he had the secret sauce, does everyone have it now does that lower the stakes for the transition because it's a machine he clearly feels is okay to hand off. and i just get that the investors have been a little bit hesitant one of the reasons stock has been stuck for a while but i'm not sure it changes the game entirely. >> although maybe that adds or derisks the fact there have been other executive departures in the past 18 months or so >> i just love the jeff bezos baseball card on this one. never have there been a value creator like this. 27 years of founder and ceo. took this company from 0 to $1.7 trillion in market tap. nobody else is even close. the closest is zuckerberg who just cost a trillion last month. >> amazing and we all got a front row seat to it. i think there's amazon stuff on my doorstep right now. thank you all very much for rapid fire today still ahead, what waste management, real estate and education have in common
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welcome back here's a striking stat from the june jobs reports. average hourly earnings were up 3.6% year-on-year, bringing wages to over $30 an hour. according to morgan stanley, it's showing no signs of slowing down they've identified companies that place high risks. adam, it's good to have you. a lot of these are retail and restaurants, right >> absolutely. right. that's where you would expect some of the pressures to show up just based on how important the cost of labor is to the operating model and how thin margins are at the end of the day. >> what are more surprising places it's showing up >> i guess some of the more surprising places, you previewed it in your intro here. i think waste management among
them, education services i think there's an important distinction to make within the restaurants. you have to be careful to separate out franchise models versus non-franchise models. casinos are much better insulated than traditional lodging firms. so, there's really a lot of nuance to measuring this both in term of labor intensity and where wages are rising >> why are casinos relatively better off >> well, casinos are better off because they're less labor intensive or they make profit for employee if i have, let's call it, $60,000 east $60 $60,000 eastbound. i'm just more exposed. casinos are better off there the other thing our gaming, particularly las vegas casinos are one of the only games in town for employment.
if you're not working in one of these employments on the strip, it's hard to find a job elsewhere. the guard banning power shifts a little bit in the local market >> i go maybe i don't want exposure but then i see names like chipotle. under armor is even performing better lately. are there reasons these companies can do well because people are giving it credit for it's a passing issue but ultimately you have a strong demand versus an issue where they have to make existential changes? >> i think that's the debate and the reality swe don't really know what we tried to do in the report was systematically screen one is labor intense tif second we are using rising wages. they're not rising every place and that matters and the third metric is the expectation game markets are about expectations relative to reality. so, we want to look at where
market expectations are high to kind of suss that out across these three metrics to get that dynamic. where is it priced where is it not? and the other lingering thing that we don't know the answer to, but why we bought in those market in the market forecast, talking about uber and passing along some of that price. elasticity and demand came up a couple of times. we know companies aren't trying to sit still we wanted to quantify where the hurdles are higher >> it's interesting that uber is not on the list. in a way it faces the biggest challenge not in the traditional profit sense but simply from users trying to figure out if the service is valuable for them to use, period >> well, i think any place where you've got a labor shortage that will pressure the cost of goods,
that's an open question. aggregate wage earnings are up a little bit north of 2.5% of where they were prior to covid the number of employees working is down 5% you can do the math to say people are getting paid more and companies are not going to stay still. next year expected to have margins about 100 basis points above peak companies can't sit still so you need to think about whether the el elasticity will be >> maybe lower stock prices or more ordering from ipads at the table at restaurants drives me crazy. thank you very much for join us. appreciate it. still ahead, just in time for the fourth of july, beef prices are on the rise so your hamburgers could cost just as much as beyond burgers
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that could be good for alt meat companies. kate rogers is here with the details. kate we all know prices are going up everywhere and beef, of course, is no exception. according to the bureau of labor statistics the average price for ground we've was $4.70 in may. up nearly 3.2% in december up nearly 10% from may of 2019 beef steaks even higher up 13% and 17% from may supply chain issues, labor woes and more have contributed to the ongoing price hikes. could this be a win for beyond and impossible they've, of course, been a bit pricier but with inflation hitting, parity is drawing closer through the end of may average unit prices were $6.20 while average unit for meat alternatives were $6.22. for seafood, $4.05 both impossible and beyond have been expanding their retail
footprints and working to bring down pricing impossible in february cut its suggested retail pricing by 20% for the first time beyond meet has has value packs and joined up with doordash for on-demand delivery if prices are dropping and you don't have to leave the house that could be a win. >> not using the alt meats though i know people who are grateful for them with dietary needs. how do they get seafood cheaper per unit that can't be salmon burgers >> we had that company on your show i believe last week and they said they were achieving price parity but couldn't get their prices quite as low. they don't specify but it is much cheaper by about $2 >> kate rogers, enjoy your
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welcome back to "power lunch," everybody. i'm kelly evans along with eamon javers wages climb and the cyber security industry, as you know, is hiring like crazy they're scrambling to fill half a million positions nationwide on wall street the bulls are in control the s&p hitting another interday high wall street will slow its roll our guest tells us how he plans to profit. inventory is falling, bidding is rising and penthouses are driving demand we will take you on a tour of a special one, "power lunch" starts right now and here is where we stand on the markets, what, about 90