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tv   Power Lunch  CNBC  March 2, 2022 2:00pm-3:00pm EST

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today. "power lunch" begins rite now. ♪ thank you. welcome to "power lunch. i'm tyler why here's what's ahead. the fed head said rate hikes are on track f inflation at a 40-year high. noting the uncertainty caused by the russian-ukraine war. oil's rally. prices pushing past $112 a barrel is 150 next? we are going to speak to an energy policy expert saying yes. >> hi, everybody wall street in rally mode. the dow's up 667 bang on 2% right now the nasdaq up 1.6%
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caterpillar, intel and travelers biggest gainers on the dow right now. s&p a reopening feel today with casino stocks leading the way. las vegas sands and wynn up almost 10% >> thank you the fed meets in two weeks and today fed chair powell said a quarter-point rate hike is a near certainty. >> i think it will be appropriate to raise the rate in a couple weeks and inclined to support a 25-basis point rate hike >> joining is bill lee from milliken good to see you. >> thank you. >> i guess chair powell taken the suspense out of the march meeting saying what will happen but what do you think happens after that how aggressive is the fed likely
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to be? lessaggressive than it otherwise would have been given oil markets in ukraine >> a lot of professional colleagues calling for the race to the top five to seven hike this is year. i think we agree 2.5% is the rate how fast will we get there now that we saw what happened to the huge oil shock and the data of xwgdp and personal income sug joesing the economy is slowing down fed chair powell said the first couple are in the bag and then have to see exactly how slow the economy is going to be. >> the whole fed, indeed the economy, is in a difficult place. the more you raise interest
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ra rates and the higher the oil goes the slower the economy becomes. what do you do did you slow the economy to the point to stall and if you do that, will you have arrested inflation? >> tyler, it is clear when we have an oil shock it is like a rise in excise taxes. >> right. >> we got a tax hike and rising rates and appropriately so because the rates are way below where they should be the real question that chair powell answered is we're going to get to price stability one way or the other and a way to say we can do it the easy way to let the economies slowly go to a soft landing or you can do the hard way which is to say we will have to make the demand come down because supply is so constricted, especially supply of goods where we see a lot of this huge core inflation going up and business services prices going up
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lack of supply has to be blapsed with demand. the economy does it itself or the fed for us. >> on that note, bill, we have did details out this hour. steve? >> thank you federal reserve said in the beige book from mid-january to mid-february economic activity expabded at a mild to modest rate the beige book said that the omicron variant disrupted business and business activity and severe weather that was cited at being disruptive. consumer spending was weaker than the prior report as a result there's low inventories set to have restrained growth and six-month outlook is stable to optimistic strong demand for workers but worker scarcity. you heard that before.
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but a few districts reported improving labor supply i have to find out where but corp. sags and workplace flexibility increased and offers flexibility at lower wage jobs pretty interesting development this is where the tough part comes. prices increased at a robust pace a few districts reported accelerating and finally this is the worst one of all, increased ability to pass on prices so if the fed chair sounds worried about inflation this makes him worries. easy to pass along the prices already and saying reporting increased ability to pass on prices right now kelly? >> makes the point about the labor labor market so important. >> sure. >> steve, thank you. stay with us
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let's turn back to bill lee. all this means is that to steve's point because people earn higher wages they take higher prices and hard to find something to slow that down. >> absolutely. we have to understand what chair powell means by a strong labor market there are vacancies because people quit the jobs thinking they have upgraded the skills and so what we have right now is a huge churn in that labor market and so in normal times it is surge unemployment. looking for jobs and the mismatch is critical to characterizing this labor market is the demand really there or just that people are not right in the places? i think the latter is the right answer people think they have skills and firms are not hiring them because they don't have the
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skills low level elementary start-up positions because people left them and people think they have better skills than they have. >> what is the ukrainian war likely to do to inflation globally to the economies of europe and the west >> i think the one thing without a doubt to make it much measure expensive to eat, use the car. that's going to really reduce the spending power of every consumer around the world. in europe because it is so tied to trade with china and with russia, the tendency of russia for energy the prospects of the europe economies recovering from this is less than before because we have not filled the gap for russian energy the liquid gas supply -- liquefied natural gas supplies
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won't get there because we don't produce enough. >> you look at ukraine, a largest world exporter of wheat and grain and interrupted to china or russia around the world that adds to food price inflation. let me ask a -- kind of an odd question when prices go up through inflation, let's set aside energy that can be volatile and we know food prices can be volatile, but when prices go up do they tend to stick at the higher level i don't think people have the wages cut. >> the question is the core inflation is once the prices go up do they stay there? >> right. >> inflation goes to zero. will it continue to go up? i think one thing the fed can address on the elements of core inflation is represents. prices are going berserk
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they get mortgage money cheaply and liquid out there if the fed were to use the balance sheet aggressively and target the liquidity withdrawals to amount that available for the overheated sectors that would go to a long way to reducing core inflation pressures and needed to solve the ongoing problem with inflation when people say 7% inflation it is many ways back ward looking because looking forward the question is relevant will prices stick? will the high rents be there will we have vacancy rates in the apartments >> interesting always appreciate your insights. >> thank you. russia's invasion of ukraine putting attention on the global markets but the dow up about 708 and that's after this beige book report, after fed chair powell this morning said he would back a 25-basis point rate hike in a couple weeks so either the marks
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pick up the dovish or applauding the hawkish today. there's a policy u-turn to france's market is off more than 8% uk stocks don 2% some say a shift is under way to change the investing landscape let's bring in chief investment officer at center stone. what kind of shift are you talking about? >> the eu is in a deflationary malaise and a concern the eu wouldn't last. the germans have a contingency plan but what happens since is covid. and the reaction to that is to announce a debt finance recovery plan with governance commitments from greece and italy. this is germany recommitting itself to european project but
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that very importantly reversed the posture to inflation and an idea of debt which they had an allergy to with the post world war i thinking now they have rearmed themselves and reversed the posture the latter part has to be accepted by the voters in germany. one could argue is that the e u has the makings of a more stable bloc with the three building blocks now potentially a common defense. this would make the currency and the stock markets a good place to invest long term and an elephant in the room and the previous mentioned short term risk from energy prices there's a balance there. the currency and the equity
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markets in europe are overvalued compared to the united states and maybe could absorb the short term hit. >> what's the implication for investors? >> for investors there's a panic because obviously for good reason people focus on the moment now but then maybe a few months from now what will have happened is two options. one is the putin regime and two weeks we would have put that 0% chance and then more likely option is status quo develops and going to be a security status quo new to europe and the west welcome somewhat involved and nothing much really changes on the ground for the europeans. other than they've got their unit, a long term concern over europe as an entity may be
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removed. >> positive news for the currency and the stock market. does it make you want to favor investments in europe right now? these long term trends mane sometimes we don't see the fruits for a long time or do you think people can make moves now? >> for us any way i don't buy an index. i find companies i think that's the way to do it. pick stocks that are isolated from the buffeting from the macro trends and plenty of companies we find that are not affected by interest rates or energy prices or what's putin going to do tomorrow air laquida is one of those. they pass the costs. the fertilizer space is attractive to us
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we find as we always have been able to find interesting things to buy there's a broad market talking about europe as if it's a country but it is not. depending on where you look there are opportunities available. >> one question. that is, if i'm looking at my portfolio and i -- let's look at the 100% of the portfolio. say the stocks and put 20 to 25% of my equities in foreign shares and let's say 10% of that is in europe would you today be increasing the percentage in nonu.s. shares and increasing the percentage of the portfolio in europe? >> for the last year or so i'm concerned and i think talking about the concern of vault vagss in u.s. indexes and i would have thought that 10% is too low to given with
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i would have been increasing it but just talking about these things it's not the next six months but five years or so. the time frame has to be thought about. could be taking on some volatility in the short term doing that but if the look like five-year period i find the u.s. market very expensive. there are opportunities around the world with quality and half the price and sometimes less and by the way you're not exactly even at 100 prsz invested in stocks is not divorced from the risks in europe. >> no, no. i was just picking the numbers out of thin air and really answered the question, that is, orr the long term the relative value and merit tilts a little
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more toward europe right? >> it doesn't -- doesn't tilt a little more. it's - >> a lot more? >> vastly more attractive. >> nailed it. >> that is a quote >> thank you for saying something. we like that we like people who say things. >> always. >> always. >> joining us from centerstone. the white house says it is very open to imposing sanctions on russia's energy industry but as prices sunlg and disruptions mount what would the impact be on you and me, the economy, and everything with stocks at market highs, where the pro is finding value and a tale of two retailers. abercrombie on pace for the rdrot day since 2019 and nostm surges we'll tell you about it.
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welcome back do "power lunch. the crude climb continues as wti oil surnled passed $112 a barrel on tensions. highest level since may of 2011. this as opec plus agreed to stick to their plans of a small output hike despite calls for more production. this comes as energy companies like shell and bp cut ties with
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russian oil companies and exxonmobil said it will not do projects in russia with more is a former energy adviser to president george w. bush you say, bob, crude marching higher ending between here and 150. here and 150 is a wide thing and it gives me very little comfort. >> it is an uncomfortable situation. since the weekend we are really into cascading surprise escalations and the biggest oil supply disruption since at least the attack in 2019 and probably back to the first gulf war in 1990, 1991 this is an authentic class-an
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oil emergency. there's only two things that will stop the rises. the market has to be convinced there's no real threat to the almost 5 million barrels a day of russian crude exports and product exports. that's why it is so high is self sanctions is not touching the crude and unless they know it won't be sanctioned they're not touching it. the other way is unfortunately with recessions and sort of savage destruction we think $150 wti shlg you're at a level consumers start to give up that's normality this is not normal we have war, inflation, and so somewhere between here and there one of two things will happen. i'll call you when i get a
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crystal ball but we don't know. >> let me follow up. you say that traders, importers don't want to touch the stuff until they know what will happen i understand that. what then happens to that product? does it just stay on the russian side of the border does it not come out of the ground what happens >> it backs up if prolonged because the oil is flowing out of the fielding through pipelines to ports and storage and loading on boats or pipelines and it is really the sea born oil half of russia's oil that's blocked and if it doesn't get unblocked it will back up. inventories will fill up pipelines will fill up and if that continues it will have to shut oilt th investigated the announced release yesterday. >> russian sea born oil is being
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blocked by whom and how? where? >> so it's being blocked in the baltic sea and black sea, to some degree in asia,because both owners don't want to take the risk of russian cargo because they could be sanctioned or chinese banks are denying letters of credit. until i'm sure i will charge a lot of money to take this and now reports where they don't want to touch it at any price. well over 50% of russia's oil is blocked until we get more certainty on the sanctions. >> you have educated me and i think the viewers because we have been so focused on pipeline carried product from russia coming in from nord stream 2 and not 1 and pipelines that we haven't focused maybe as much as
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we should on the ship born product. the other half of the question if opec is not going to increase supply by more than its stated increment, what is the ability of u.s. producers to kick in and start ramping up production? or is that off the table because it takes too long, because the administration has been unfavorably disposed to the fracking that some of that product would require? >> yeah. unfortunately it is really hard to increase shale oil production, crude oil production overnight in the united states or anywhere else for shale oil months to quarters after a decision is taken to drill and right now talking to a shale oil executive saying every truck driver in west texas is working for amazon even if they wanted to would be
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very difficult to increase production the only place to get quick oil from saudi arabia or iran. one benefit from the administration' perspective of signing a nuclear deal to unlock quick oil from iran and only quick option unfortunately. >> very, very informative. as always. we appreciate it. >> thank you. coming up, ford's fork in the road a massive corporate restructure. will this be a major opportunity for investors. we're back in a moment
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and a commitment to get you the best price on every trade, in other words... which saved investors over $1.5 billion last year. that's decision tech. only from fidelity. welcome back to "power lunch. i'm dominic chu tracking a rebound in sectors including the industrials and some leaders there are names like cummins engine, deere, each of these up between 4% and 6% on the day in firmly positive territory after drops yesterday. seeing a pause in the outperformance of many defense contractors in the sector namely
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northrop grumman, lockheed and raytheon up between 9% and 20% given the russian war in ukraine >> let's get to rahel solomon. >> good afternoon. the white house is detailing a new national strategy to test and treat covid. official says it's designed to get the nation back to a more normal routine allowing pharmacists to prescribe treatments as soon as someone tests positive united states is expanding sanctions to belarus for enabling russia's invasion of ukraine preventing russia from importing technology from u.s. is coming. just moments ago a powerful exploes reported near the city's railway station. a billion for an oligarch
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facing western sanctions said he'll sell the premier league soccer team he owns. he is not planning a quick sale. the team is valued at more than $3 billion he say that is the proceeds will go to a charitable foundation to benefit quote all victims of the war in ukraine and amazon is moving from brick and mortar retailing and selling the physical bookstores, pop-up shops and four-star stores it does however plan to work on cashierless grocery stores. >> have you been in one? >> no. and curious how it works. >> seems like a mishmash of stuff. >> only reason is because it's the only place to get books in the malls these days. >> so sad. >> visit them before they go to
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say you have been there. >> can be fun sometimes. ahead falling banks, falling yields a run on bonds and running away from financials. we'll discuss that when "power lunch" returns ♪♪ chef, can we hire another hostess? umm... psst. yeah. i was gonna add an exclamation point. thank you. clover does that. this is really good. secure payments, the tools you need, people who can help, we do that. talk to a clover business consultant today
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welcome back, everybody. let's get the market reaction to what fed chair powell told congress dow's up 637 we'll get caught up across the major averages beginning with bob pisani at the new york stock exchange. bob, what's with the optimism today? >> there's a couple things going on and most important is powell, traders terrified powell to overshoot on the rate hikes and kill the growth prospects. today very specific guidance 25 basis points. inclined to do remarkably specific. that calmed nerves he wouldn't kill the goose and then had the foreign minister of russia saying willing to discuss the ukraine's security needs which is rather a surprising comment yields moved up. bank stocks clobbered in the
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last week and a half and had a nice rally and saw the big industrial names caterpillar, all moved to the upside this is what you want to see on the international growth names usual movement in the reopening stocks and particularly names like the casino names did well the hotels like marriott and the airlines i want to make clear that the main focus trading activity is around the ukraine we had heavy volume in the commodity etfs the oil fund which is oil futures contracts. bond funds have had huge volume in the last several days the biggest actively managed in the united states. let's show you a two-week chart. remember about february 17th when president biden came out and warned that the threat of
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the invasion from russia into the ukraine is high and attack could come very soon market dropped to 43.80. all the way to 41.30 or so on february 24th and come round trip not only to 4380 but broke 4400 and now back below that level but quite a remarkable move and ukraine is still very much front and center what a masterful performance from jay powell calming nerves today. >> thank you in the bond market we have seen a big return to where we were before if you want to call it that rick >> yes definitely u-turn. looking at the equity markets as bob aptly gave you a synopsis or looking prices on fed fund futures or interest rates.
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but is it really a -- once you get passed the morality of the invasion by russia it is only a commodity story with energy at the very top and then grains maybe second and why am i bringing this up? i didn't talk to a source that thought that jay powell would be too hawkish today epa pretty much delivered what the markets in path to deliver even if he didn't speak today que equities are green and the markets in the process to reverse. look at a chart of 10s not above yesterday's high yield 1.86 you can clearly see once you every above that 1.85 line put the momentum back to pre-invasion many ways and bunds less aggressive on the come bs back they have one negative close yesterday.
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minus 0.07 since turning positive three weeks ago and looking at the barclays index, a three-year chart in the context of the history corporates, investment grade, and high yield perform extremely well. >> that is extremely important to mention thank you. oil meantime the headliner continuing the run today wti up to $112 pippa stevens here with more. >> new multi-year high today global bench mack brent to $113.94. highest since june 2014. we are closing off the levels. wti up 7.33% at $110.99. both now up more than 40% on the
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year opec and allies did meet today deciding to keep output steady raising prix by 400,000 barrels a day next month and had trouble hitting the outpit targets and remains to be seen how many barrels come to the market energy is top sector today upstream players are taking a breath for the year every single component is up at least 11%. >> plenty of people chasing the returns now. thank you despite the risks our next guest said there's good news behind the market concerns let's bring in jeremy bryant jeremy, what do you think people could start to realize here as some anxiety settles down? >> yeah.
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first thing is covid numbers are collapsing from hospitalizations, deaths that is a big alleviation of stress from the things that we can get back to doing on a normal basis and so, being that the consumer economy is 70% of the economy if we can get back to normal that is phenomenal for our economy. if we get to that and not only that the supply chain components as covid restrictions start to acleave yate we think it adds to the element to satisfy that demand more to where you can see inflation start to wane down towards the second half of the year combine that with earnings growth were above expectations i think over 75% exceeded expectations russian conflict is a problem and it's something we have to take into consideration but outside of that there is still
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some good news in the markets to drive the things higher. >> where would you put money now in anticipation of what you see? >> yeah. so we did a couple things. honestly, this week is the first thing is to do an examination of who can grow the earnings in the double digit range and with corrections that are cyclically positive and the first one is blackrock, a phenomenal company overall from asset management perspective. they continue to grow very well why they have space in the etf, actively manage cross landscape and been there in scenarios and usually added value with a correction the other area we add to aggressively is the home building cycle and we bought lennox and lowe's as
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beneficiaries that have come down to much more normized valuations and we think the growth profiles in 10 to 15% range over 10 years and still growing very well and the recent correction in the overall markets allowed us to get in at a valuation that makes sense to us. >> thank you we appreciate it. ford's new focus the stock surging today up 41 prts over the past 12 months shifting into electric vehicles. and now the company is betting even bigger on that owgring business that story is next [copy machine printing] ♪ ♪
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if you needed more evidence that the future of the auto industry is leelectric vehicles today said they'll split into two units, ev and i.c.e. phil >> this is a big move by ford. both units will remain within ford so this is not a spinoff but here are the two divisions
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created by ford why there's model e dealing with electric vehicles and ford blue with the traditional business, internal combustion engine models gas powered. ford is ramping up how much to spend and build with evs from 30 billion through 2025 up to 50 billion through 2026 they plan to produce annually by 2026, 2 million electric vehicles with a target of 50% of the global sales by 2030 being electric vehicles. here's jim farley talking about the need to move faster. >> this is about new talents, new capabilities and focusing that on the areas that we need to catch up and pass competitors like tesla. >> notice he said tesla there? interviewing him he talked about tesla and neo. they know the competition and
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reaffirming the 2022 guidance and full year expect to earn between 11.5 and 12.5 billion. perhaps they could have a profit margin of 8% and setting a target of 10% by 2026 and reported february sales today down 20.9% most of those if not almost all of the vehicles 98% internal combustion engine models. >> thank you. with the fed set to raise rates where will bank stocks stand? big banks and regionals higher today but the financial etf down over 4% in a month we'll speak to a top analyst about that next.billion only from fidelity.
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news out of capitol hill straight to ylan mui. >> reporter: kelly, a new bipartisan bill blocking the u.s. from purchasing oil and gas from russia. this bill is led by senator joe manchin, democrat from west virginia and republican lisa murkowski of alaska.
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declaring a national emergency during which the u.s. would not be able to purchase oil, petroleum, petroleum products and lmg while in place this bill and concept enjoys strong support from most republicans in the senate and growing support amon democrats president biden saying nothing was off the table asked specifically whether the u.s. would stop buying oil and gas from russia. we'll see where the bill heads clearly, there is growing pressure and growing bipartisan support for stopping those oil and gas imports from russia. >> interesting last night as why was watching the pregame to the state of the union i saw senator manchin and senator murkowski on the floor talking to one another with senator collins. very animatedly. i wonder if this was part of the topic. how much russian petroleum product do we import >> reporter: something like 600,000 barrels a day come from
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russia democrats said, democratic leader chuck schumer said recently that's just a drop in the bucket for the u.s the real problem with oil and gas prices is from companies price gouging. not necessarily with our imports from russia. certainly this is an area where there is growing alarm and controversy on capitol hill. >> all right thank you very much. ylan mui, appreciate it. financials leading today but not the case the past few weeks since the ten-year yield hit a two-year high a few weeks ago it's fallen more than 20 basis points stocks along with it more pain ahead in financials? with us now is gerard cassidy head of u.s. bank equity strategy at rbc capital markets. how are the banks coming out of this >> i would say -- i suggest it's really going to be driven by what goes on here in the u.s. economy, and if, granted, it's
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very unknown what the outcomes will be with the current conflict in ukraine and russia, but if we anticipate that the u.s. economy will have only a minimal impact from that conflict, then we're certainly seeing it already in the price of oil and other commodities the u.s. economy koontz to grow possibly maybe 3%, 4% as many expected trier to the conflict, maybe slower than that, but inflation is still a challenge the fed will have to move on rates. that is the critical aspect by bank investors can make money this year. even at this point by owning bank stocks. why have they been suffering so much, rates, until the past couple of days, 2%, a little above sometimes. that you would think would be a helpful factor for banks, but here you see on our screen since the middle of february, morgue be stanley down 15%. jp down 10%. bofa down 9%, wells fargo down
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10%? >> good question i would say a couple factors first, of course, derisking of what's happened recently since the conflict broke out to your point from middle of february the names identified happen to be all the banks that have very prominent investment banking operations, and we know from the data we've seen year to date through the end of february that the investment banking revenues for all of those players are going to be down meaningfully in the first quarter versus first quarter of last year. i think look at regional and leadership that's changed. morgan stanley and goldman sachs, their stocks are fantastic from the start of the pandemic up through the end of 2021 that leadership has been passed over to the regional banks that don't have big presence in investment banking and have biggest benefits from rising short-term interest rates like m & t bank. >> got to hold on to that point
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on morgan and goldman. leave it there appreciate your time today thanks so much. >> you're welcome. >> gerard cassidy. orgeand still ahead, labor wh at does that have to do with gasoline station ace cross the garden state that's next. er $1.5 billion las. that's decision tech. only from fidelity. alright, so...cordless headphones, you can watch movies through your phone? and y'all got electric cars? yeah. the future is crunk! (laughs) anything else you wanna know? is the hype too much? am i ready? i can't tell you everything.
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but if you want to make history, you gotta call your own shots. we going to the league! - super excited to open up my diploma from southern new hampshire university. - i'm nervous, i'm excited. - [man] okay, let's see it. let's see it. - oh my gosh. - as soon as she saw this, i did it and it's here.
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- [man shouting] yeah! (upbeat music) - [narrator] next term starts soon. visit hey lily, i need a new wireless plan for my business, but all my employees need something different. oh, we can help with that. okay, imagine this. your mover, rob, he's on the scene and needs a plan with a mobile hotspot. we cut to downtown, your sales rep lisa has to send some files, like asap! so basically i can pick the right plan for each employee. yeah i should've just led with that. with at&t business. you can pick the best plan for each employee and get the best deals on every smart phone. one of the many good reasons for living in new jersey so many. >> underrated.
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>> it really is. beside the oint. you don't have to pump your own gas. at least now the last state in the country still outlaws self-serve according to dominic chu, they might be ending that >> a proposal. many listeners on sirius xm could identify with. in the new york metro area encapsulates how tough the economic environment has gotten and why president joe biden spent so much time talking about inflation measures during last night's state of the union address. jay powell noted in testimony labor markets are very tight gas stations, large and small, are finding it a lot more difficult to hire people to pump gasoline and many owned by large corporations and many are small independent who do have measures to raise wages necessarily and representing gasoline and
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convenience store owners proposing a law allows full service, self-service or combo but larger operators with more than four pumps still have to keep full service between 8:00 a.m. and 8:00 p.m. each day. the new jersey gasoline convenience automotive association estimates stations could charge 15 cents a gallon less for fuel if that full service staffing requirement was dropped. this is not just about the labor supply it's about alleviating price pressures to consumers. >> see it. every state doing anything they can to come up with -- how long in place this would be historic >> i would note this i have, my wife and her family are from new jersey. they've been here a while. watched this play out for decades. there have been people trying to repeal that full-service obligation that many gas stations in for decades and never goes through people want to keep that full service in there
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lobbying groups, interest groups whatever still, it could be huge if the narrative now is enough to change the last state in the union to make this legal. >> give people options drove up said, pull over here pay 15 cents more for this, or not. i don't think anyone -- >> tell you where i'd go 15 cents less. >> exactly everybody would. >> i pump my own gas i'm in connecticut i pump my own gas. >> you manly man you thanks for watching "power lunch," everybody. >> "closing bell" starts right now. hello and welcome to "closing bell. i'm sara eisen here at the new york stock market. another day of big market news this time stocks moving higher, metric watching developments out of the fed and europe. dow's up around 600 points heading into the final hour of trading. >> i'm mike santoli. look what's driving action fed chair jerome powell signaling a 25 basis point hike at upcoming march meeting noting war in ukraine is adding uncertainty to the market. oil continues to jump on suppl


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