good >> joe >> diamondback energy. this is not a call on oil, this is ididiosyncratic to the compay >> speaking of nvidia, perfect day to have my guest on "closing bell." i'll see you then. >> that's a great lineup thank you, scott welcome to "the exchange." i'm kelly evans. here's what's ahead on this tuesday. stocks, yields and data, all a mixed bag today. consumer confidence in may breaking three straight months of declines, but those one-year inflation expectations rose to a five-month high. well, even if the fed holds rates higher for longer as a result, our strategist says that makes him more bullish on stock prices, and he's managing to look outside of tech we'll get all the names he's buying now another positive sign for equities town the uptick in

stock splits nvidia, chipotle, walmart, we'll look at how these names performed after a split, and a lot of companies that would be next plus, this name is getting an upgrade today, sending shares up as much as 9% the analyst behind the call is joining us to tell us why the ai rewards will outweigh the risk but before, let's get the numbers with dom chu >> very mixed, because we got two of the major indexes moving in opposite directions the dow, down one half of 1%, roughly 210 points, 38,860 the last trade there, near session lows at this point meanwhile, i'm going to put a star next to the nasdaq composite, which is up half a percent, up 100 points to 17,022, because it did today at one point hit a record intraday level. somewhere in between, just about flat on the session right now is the s&p 500, which is up three points at the highs of the session, we

were up roughly 11 points and down five at the lows. so a muted trade for the s&p 500 coming into this holiday shortened trading week one place we are seeing more volatility, although the places don't show it, are in crude oil markets, which wti prices are about 2.5% to the upside, holding right below $80 a barrel comex gold prices up 21% we have incremental moves from more tension in the middle east with regard to israel, gaza and the palestinian situation, and a lot of traders looking ahead to this sunday's virtual meeting with opec and partner companies where there are expectations building that they are not going to add more production to the market so you're seeing a little of that movement higher on crude prices and then, if you didn't know, the mean stock is apparently back, at least for today gamestop up 30%, up as much as

40% at one point today all of this after the company announced that it had sold and raised about $933.4 million worth of stock by selling 45 million shares in an active market offering. they were just going to the market and getting what they could for them so shares trading higher on that bit of news. i will point out, kelly, if you look at amc and some of the other stocks smaller in size, the moves are not quite as big, but they're still there. so we'll see whether or not this has legs or not. >> dom, people need to know you do this without a teleprompter say that again >> $933.4. >> it's all in your head >> i like numbers. >> that's why you do what you do dom chu, thanks. minneapolis fed president neil kashkari reiterating his hawkish leaning today, saying nothing should be ruled out, not even hikes in the current environment.

>> the u.s. economy has remained remarkably resilient gdp growth has been strong, much stronger than forecast most people thought we would be in a recession that didn't happen instead, we had strong growth. u.s. consumers and the housing market have remained resilient, so we should take our time and get it right >> my next guest is not expecting a rate cut, but that can be good for stock prices here is to explain is a chief equity strategist. great to see you again >> you too, kelly. >> what you are saying is supposed to be a contrarian thing, but has been true of this cycle lately explain why you're still bullish. >> i think this is one example where it helps to be a little older, because we can remember back to a time when mortgage rates were 8%, the 10-year at 6%, and the market did just fine i really strongly feel that

higher rates are a characteristic of a healthy economy. and so what scared me more is the thought that the fed may feel a need to cut rates that would scare me more i don't see that i guess neil kashkari doesn't see that either. so i see clear sailing going ahead. >> the only sort of asterisks, of course, we still have an expa expansion, but with inflation. you look at this, where yeah, the data is a lot weaker than it should be in terms of how people feel about the economy inflation seems to be part of it, maybe a covid hangover, maybe political, who knows but that feels like that's not a characteristic of a strong and vibrant economy. >> i would agree with that so as we both know, there's always a problem with the economy and the market if i had to pick my problem, right now, that problem is, maybe inflation is running a little too hot, maybe confidence

is a little off putting because we just came through a pandemic. ky deal with that, as long as corporate earnings are good. and that's really a pretty objective figure, and we just finished an earnings season that i would give a b to b plus >> better than what we thought or the bears thought we would be >> right >> let's bring in rick santelli. the five-years just went off rick is tracking the action. how did it go, rick? >> i had to hold my nose on this one. this is one of the nastier auctions i've seen in 2 1/2 months it was 77 billion five years, which equals the auction last month. both are the biggest in history for that maturity at 70 billion in size. 4.553 is what the yield was, which is 1.5 basis points higher in yield than the one-issue market higher yield, lower price,

government was the seller, priced horribly and the metrics were weak. the bid-to-cover was the weakest since september of '22 indirect bidders, it was the only metric that was near the ten auction average. direct bidders was the weakest well, i found a bunch of 15.4%, but to find one lower, you have to go back to december of '21 and the dealers, taking a whopping 19.5% now, grant it, that's just the most since january of this year. but other than that, you would be hard pressed to find much bigger percentages for the dealers to get stuck with, because the buffet table is still pretty full after investors were done shopping for those five years if you look at the charts, you can see the response many times when you get an auction below average, this is aggressive twos, threes, fives, sevens, tens, all ratchets up to the high yields, low prices of the

day. and many maturities traded below friday's low yields before this move, which now puts them above friday's high yields this are big breakout days to the upside pay close attention. tomorrow, we'll wrap up, 183 billion in coupon supply with 44 billion seven-year notes kelly, back to you >> rick, what about people who say hey, hey, it's a tuesday, it's a holiday, it's thinly traded >> there's something to be said for that this auction i gave a d minus. so this one particular auction based on all the metrics of the day. it doesn't mean tomorrow's auction won't go better or that the globe isn't going to continue to buy our debt i'm just giving you a blow by blow accounting of the auction so you can monitor -- investors can monitor the trend of how demand seems to be moving as we see bigger and bigger size

coming to the marketplace. >> it was enough to spook the s&p, which is now clawing back into positive territory. rick sen tantelli, thank you certainly, no one wants a deficit spiral, and the debt -- deficit situation to be one of thome. so people have already joked that the next phase is everyone is more being to buy corporate debt than u.s. debt. what are your thoughts >> first of all, there's nobody better than rick san teltelli tt to the heart of the auction, but you're right, it's one day i don't think we're going to get into that deficit spiral just yet. i've been getting asked that question for more than ten years now, so i don't see a reason for it now but what i do see is momentum behind the market. i see a market that wants to go up, and as long as we keep that

ten-year below 5%, i think that there's a pretty -- there's an open line for the stock market >> that was the same number that jason said again, it might be more psychological than anything, but that does have an impact >> it's nice and round >> it is so where are you looking in this market you had the famous verizon tesla call >> still going strong. >> i don't know what the spread is at this point what are the best trades, where are you looking now? >> well, not unlike that, i do think that the mag seven is sucking capital towards it and clearly, they're working right now. but the end result of that is capital has been sucked away from things that may be good investment i'll give you two that i really like for long-term investments one is lithium really like lithium. i think the problem with u.s. investors is that they're u.s. centered evs are not selling well in the

u.s. right now, but they're selling like hot cakes in china and europe this is going to be a worldwide phenomenon >> the only problem with lithium is the old famous debate over the '70s, where the whole idea of commodities going up in price seems to be, you know, i know we're in an upswing right now, but broadly speaking, the higher price seems to bring on more supply and you can't do well in the long run >> that's not been true for lithium in the last two years. so this is akin to more buying oil in 2020 when it crashed and went negative for a bit. so lithium prices have been down for the better part of two years, the stocks are down 60, 70%. so i'm not saying we won't have those cyclical moves, but right now we're at the bottom of the cycle. i wouldn't own a lithium stock that does well for ten years, but you can own this for a while, because expectations are incredibly low

>> so you like lithium there's the commodity. what else? >> i like hershey's. great brand, and i like it because as you reported many times, the price of cocoa has gone through the roof. that's really hurt the price of hershey's stock. not only has it hurt it, but it's masked really good operational improvement. so earnings have stayed flat, even though with cocoa prices going up 200%. it's their largest cost of goods. and they raised prices, but as you probably know, cocoa prices have declined by about 30% over the last month hershey's stock has gone up a little bit, but not a lot. so looking forward, especially if you think there is a slowdown coming at some point, this is a staple stock that hasn't participated >> what inning, i guess, so to speak of the whole expansion are we in? is this 1995 >> i hate that question, but if

i have to answer that, i would say this feels -- and i managed money through the '90s -- this feels like mid to late '90s. >> mid i feel okay about >> this is not 1999. and nvidia is a perfect example. it's expensive, but not as expensive as those stocks got in the late '90s. it has a toll road for ai, which you can't get there except through nvidia so cisco got to over 100 times earnings >> even in recent memory, netflix and tesla were over 100. >> i don't think we're there, but i don't see a thing that stops us from getting there. so i think we're kind of on the road there so it's a double edged sword >> see if the chase is on at some point at least we don't have to worry about rate hikes

chris, thank you very much as we mentioned, the nasdaq is hitting a new record high today, helped by a now 7% jump in nvidia shares, good for more than 76 points on the nasdaq 100. nvidia is up 18% since announcing the 10 for 1 split, and my next guest says splits are usually a bullish indicator with companies notching 25% total returns in the following year, compared to 12% for the broader market so who could be next jared is head of both the research investment committee and etf strategy at bank of america securities jared, welcome >> thanks, kelly glad to be with you. >> there used to be a lot of high-priced spops in the market. are there still some left that can be split candidates? >> there's a big list. we looked at companies in the s&p 500 with share prices of 5 wood -- $500 or more, that's about 16% of the total market

cap of the index so a big chunk of the market with relatively high share prices i think this is important. it's true that stock splits don't change the fundamentals of a company, of course but while fundamentals matter for the long-term, the short term, per spception is just as important. and there are a lot of individual investors very active in this market as long as financial conditions are easy, we think it's important for companies to show shareholder friendly policies and stock splits can be a part of that. >> people tend to be trend following. who is left in big tech that might be next, microsoft, who else >> you've already seen a lot of the magnificent seven companies, you know, apple, google, tesla, already announcing share splits. we see microsoft, we see meta with pricesapproaching that $500 threshold and it's not just technology companies. there's other sectors in the

market where you have big representation a lot of the largest companies with really high share prices are also in the running today. we think that's the next place to look if companies decide maybe buybacks are too expensive at this moment, they're not sure they want to engage in lots more capital expenditure. splits can be something where you send a friendly signal without deploying a lot of capital. >> nvr is its own animal i don't know why they don't split that stock some more interesting names. eli lilly you think could be one. >> that's right. a lot of these names, whether it's health care or consumer discretionary, companies that are very visible to investors and consumers are poised to benefit the most as you mentioned, the history on this is compelling, that the average stock after a share split, returns about 25% over

the subsequent year in our historical data. if you compare that to about 12%, it looks like an interesting trade opportunity when companies decide to send that shareholder friendly signal >> you have super micro, lam research they also get an added lift when the spoke split usher them into an index like the dow, or some of the smaller ones you don't get as much of a benefit but is there a boost to names that might split and enter the blue chips >> it can be, it can be the case and whether it's in the dow or the s&p 500, or however investors hear about the news, i think that, again, it's more about perception than fundamentals and when investors have so many ways to invest today, etfs, different funds, bonds looking more attractive, getting a little bit of attention around a shareholder friendly split is

basically a free and easy way to get on the radar of individual investors. we have seen the lows for a number of splits in history, and that is going to be a continued activity in the future, especially how expensive valuations are in the markets. you've had comments from investors suggesting buybacks were looking more pricey than they want at this particular moment so you may see more executives in the future looking to stock splits as a way to look friendly without having to commit at high valuations >> jared, great stuff. thank you for bringing it to us. appreciate your time today >> thank you still to come, some restaurant names are higher today as jpmorgan hyped its price target while maintaining its underweight on cheesecake factory. restaurants in the s&p are underperforming by a wide margin in the last year is it an execution problem or is the consumer showing cracks?

we'll ask clarence out is about that and elon musk's xai is valued at $24 billion. could it become the biggest challenger to openai we'll debate that. "the exchange" is next after this to start a business, you need an idea. it's a pillow with a speaker in it! that's right craig. a team that's highly competent. i'm just here for the internets. at&t it's super-fast. reliable. you locked us out?! arrggghh! ahhhh! solution-oriented. [jenna screams]

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welcome back to "the exchange." consumer confidence climbing in may, and i know mark zanldy is listening up the index rebounded to 102 from a revised lower 97.5 in april. but earnings will tell a little different story. pepsi, mcdonald's are all flagging, and when it comes to food and restaurant names, inflation is hitting the industry with a double whammy, and my next guest spent a decade at the helm of one of those restaurants. clarence otis, welcome >> thank you >> i don't know if you want to offer any, you know, words of remember lance for red lobster before we live in. what a turn of events for a well-nope and loved chain over the years. >> it is and it is unfortunate and sad for me to see it darden owned remember lobster for a very long time

we did sell it ten years ago we felt there was some structural issues that red lobster was facing that made it -- made sense to sell but we do regret seeing it where it is today. >> sure. i mean, you look back and think could there have been a different buyer or was it past the point of rescuing at that point? >> really, you had some structural increases in their primary food cost, seafood those continue and you had a chain that really, its core customer was much more of a working class customer. so that dynamic make for a group business model, and i think among other things, probably shrinking the restaurant foot print made sense, and with the restructuring, they will be able to do that so i think that's a good thing >> the way you described it would tell you okay, there's

going to be some formulas that work in this economy and some that don't so when you look around at what you have heard from some of the other big chains reporting, what are your conclusions about what's going on here >> well, i think it is about inflation. the other piece is so important to restaurants is the job picture, which is quite good at this point but as you said, inflation is a double whammy. it does a couple things. one, it puts tremendous upward pressure on the two biggest cost areas. food and labor those two combined are about 2/3 for full-service restaurants, about 2/3 of total cost. so quite significant the other thing is inflation is reduce discretionary income for many of the customers, and they're just not eating out with the same frequency and when they do eat out, they're choosing menu items that are lower priced so i think that's a big piece of

it we can dig a little deeper about which customers are most affected, but that inflation ultimately is the culprit here >> what do you do about it the obvious thing is to lower the price point, but that will hurt profits mcdonald's is going to be in fights over its new $5 menu. do yo do you think restaurants can hang onto profit margins >> you have to step back and see who is being most affected until most recently, it was -- i like to look at household income, it tells a lot until recently, it was the bottom 40% that were struggling the most they are important to everyone, but they're more important to the qsr players, mcdonald's and those folks. as we have gotten in the last couple of quarters, what we have seen is thenext two income

quinntiles, the second and third, have also started to cut back so you have to look at your customer base and segment it, as you think about strategies i think for qsr, for that bottom 40%, they do need to communicate the value, and they need to put together deals and that will stress margins for sure so the question is, how long are the franchisees, because most of those systems are franchise, willing to live with that margin pressure >> do you have any evidence or suggestion from history how long that might be, and the end result it's all going to have? >> well, i think they will benefit a little bit from tradedown, from casual dining if history is a guide so that helps. and some of those customers are willing to spend a little bit more, so it's not just about the value menu, it's also about,

again, communicating the value offer in your food service -- in your food price items more aggressively but i do think there are limits. you'll start to see some stresses, because some franchisees are not as well situated for handling that margin pressure. when you look at the casual dining chains, those tend to be more company owned and so they have a different set of dynamics. they too will stress value the labor piece of it is a problem, but not as much a problem for them with their check averages as it is for qsr. they will stress value they will also drive people -- not so much to reduced priced items, but they will drive people to the lower priced items that are already on their menu that have strong margin dynamics and that will be important for them >> like french fries i'm trying to think what would

be a good example. >> a good example, if you go to an olive garden, there are some pasta dishes that just have higher margins implicit in them than some of the other items and they are lower priced and even with those lower prices, they have higher margins so you'll see advertising and promotional strategies to feature some of those things >> so i'll be watching closely might have to do some channel checks here and test it out. clarence otis, thank you for joining us we appreciate your time. >> thank you sticking with the restaurant space, starbucks shares are down 11% since reporting that surprise declines in same-store sales last quarter now the coffee chain is heading back to the table with its union this week. our kate rogers spoke with one of the top delegates kate, what are their issues? >> kelly, so the quarter was admittedly a tough one for starbucks. members of workers united may

have some wind at their back in pushing for changes in stores te ceo. on the earnings call he said - >> the company saw a more cautious consumer, but troubling trends including occasional customers coming into stores less since the start of the union, staffing and schedule having been a top priority and continue to rank among the issues highest for unionized workers. the public comments were a welcome change in tone for the union as the approach has differed from howard shultz's in working with the union >> i think this is a new world right now, to be able to say that the ceo has stepped up and said look, we have some problems, we know we have some problems, we want to work towards fixing those problems. as a worker at a unionized

location with proposals on the table to help solve these issues, that's what i want to hear >> starbucks said it's made significant progress over the last two years with regard to staffing and scheduling. its current advanced staffing model is able to take into account historical trends and current trends, available product types and promotions so this will be key when it opens up the mobile app to nonawards members in july to get the occasional customer coming in more. >> part of what we're learning, the issues that were plaguing the stores as they were considering or going under this unionization movement are actually genuine issues that the company needs to address at a national level >> you know, kelly, the issues are store by store remember, these workers did organize on an individual store by store basis, but i had that but as i was listening to the call these are things the union with regard to staffing and

scheduling, you know, have been bringing up for several years. so you're seeing it play out there, and you're hearing the company say we are committed to working on these things and rolling out a siren beverage system that will make things easier and faster to make drinks so that's another thing to be looking for. starbucks has made progress, but there is more to do. that for workers is what they want to hear as they head into the negotiations on the non-economic proposals >> kate, thank you very much for that reporting kate rogers. coming up, might be a short trading week, but there's retailers with earnings on deck. we'll look at four names in today's "three buys and a bail" coming up on "the exchange." don'gonyert awhe. they ignored your potential, and mocked your ambition. but it's not the critic who counts. with every swing and block, your game plan never changed. ♪♪ some still call it luck. let them.

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since my citi custom cash® card automatically adjusts to earn me more cash back in my top eligible category... suddenly life's feeling a little more automatic. like doors opening wherever i go... [sound of airplane overhead] even the ground is moving for me! y'all seeing this? wild! and i don't even have to activate anything. oooooohhh... automatic sashimi! earn cash back that automatically adjusts to how you spend with the citi custom cash® card. [mind blown explosion noise] welcome back to "the exchange," everybody i'm tyler mathisen with your cnbc news update at this hour. the judge in donald trump's classified documents case in florida rejected a gag order request from prosecutors to keep mr. trump from commenting on law enforcement agents on the case he said the defense did not have enough time to discuss the request before it was filed.

though the request was denied without prejudice meaning the request could be filed again meanwhile, the hush money trial in new york is now on lunch break after the defense finished its closing argument. the prosecution will go next, could wrap up by the end of the day. then it goes to the jury after they receive their instructions from the judge that could come tomorrow morning. a lucky "home alone" fan could own the famed house in the chicago suburbs. according to a listing, it's up for sale the price, be ready, $5.25 million. the home previously listed on airbnb in 2021 for an exclusive one-night stay if you liked the movie, you might like the house >> tyler, thank you very much. see you soon coming up, these shares are up almost 9%, the analyst behind the call tells us why he sees more than 45% upside ahead after the break.

welcome back to "the exchange." while elon musk waits the fate of his $56 billion pay package, another venture of his just raised $6 billion in its latest

funding round. steve is here with all the details. a add mirable how he can do this >> from previous investors, including sequoia and fidelity >> which is presumably under water. >> that's what surprised me more than the $6 billion, these folks saw what he did to twitter and said yes, give me more of that but that $6 billion, if you think about where that cash will go, this is based on a pitch deck that the information saw, and they reported on this over the weekend, saying we're going to build this ai super computer, which translates to, we're going to give a lot of those billions back to nvidia and buy up those chips. >> so there's no business yet? >> no business model there x.ai said they're going to use this to release products

it's hard to use grok. you have to be a special twitter user there's no app that you can download like chatgbt. >> i saw that "the wall street journal" went through a bunch of the chat bots and picked perplexity >> that's my favorite, too >> what would the significance of that be for an upstart like grox or x.ai trying to break >> they're so behind you have openai, we've heard from google, microsoft, we'll hear from apple in a couple of weeks. and they're way ahead of what grok and x.ai is offering. of course, this seems more like a bet that elon musk can paint his magic on top of this and catch up but you also got to keep in mind, it's an open source model. so just like meta's llama is and so forth we heard so much about these

open source models being hosted on giants like amazon and so forth. they barely got a mention over the last couple of weeks, x.ai, so that will be interesting if these other clouds are ready to adopt it or stick with their own cloud as well, which makes the open source thing not matter as much >> speaking of openai, what's the latest there after the departure of a few key executives >> this happened right before i came onset y jan liky just announced he's going to an tropic remember what's going on at openai, a lot of questions how they handled safety. today, they're going to study safety for three months and figure out what to do. their two top safety guys just left, and keep in mind, anthropic started over concerns of safety, as well

so it's this interesting theme revolving around openai that they're playing it fast and loose and meantime, you have anthropic being steady eddie >> is that working out business wise at this point >> we don't know they just hired a cfo and chief product officer, so they're starting to hit the gas on commercializing. so it's early for them >> claude is their chat. >> they all have weird names >> it's like a new little family of people to think about steve, appreciate it very much we'll follow more of the story next hour. staying in the ai realm, shares of duolingo are up 9% after an upgrade to market perform at jnp, whicsaying like enables from enabling conversational experiences and improves teaching efficacy joining us now is andrew boone,

the analyst behind the call. great to have you here, welcome. >> thank you for having me >> tell us why you think one of the categories people expect ai's translation abilities to almost wipe out entirely, meaning translation services, why this ai technology could be bullish? >> well, duolingo is going to launch a product later this year that will allow you to converse directly with some of its characters imagine conversing with lily in spanish and practicing a lesson on hotels or whatever it looks like we think that can unlock additional opportunities as they upsell that with new subscription offerings >> that is what the ceo himself was saying, let's take a quick listen >> the thing that they really allow us to do is teach conversation better. there's many aspects of learning

a language you have to learn vocabulary, read, but conversation is something we were never able to teach you with a computer. but now that's something we can teach you. >> it sounds like that's what you are saying, this opens up a potential lucrative pathway for them >> yeah, exactly i know that there are some concerns out there that ai may negate the fact that you have to learn a language to be able to go somewhere and converse with people i think that's really a misunderstanding of what duolingo offers. i think it's this fun, entertaining cap where the key to success is with the engagement that it builds around the app. so you have the core base, and now they're layering on these additional services that will be unique and still fun and engaging for the audience. i think that's one of the potentials i look at in '24/'25. >> how will that directly help earnings and how soon? >> yeah. so the conversational product isn't launched yet, but they do

have max, and you can have these short little snippets today available on duolingo. if we look at what 10% of the potential subscriber base would look like, we think that could be around $100 million in inkremental revenue that's not built in >> you have a $260 price target, 46% upside from here you mentioned the family plan, which can drive retention. so there are some other levers to pull here, as well. >> yes, definitely one of which is the family plan. we also think that there is additional levers around just additional engagement with advanced english speakers. so that is the english product, in a country like the philippines where duolingo has somebody who kind of knows english, duolingo can do a better job of placing them and teaching them more advanced

skills so historically it was beginner language learning. >> soupuper interesting thank you for joining us to talk about it >> thank you so much still ahead, shares of draft kings are on pace for their fourth down day in five, and their worst day since early august last year, on news that illinois is planning to raise taxes on sports betting. shares are down more than 10%, and fandual is down 7% penn down 4% we'll get a check on that and some of the other big movers right after the break. (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is.

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it's gain in tact because of nvidia's strong upward move. the ten-year yield, 4.54 keep an eye on this. and we're watching apple, which is higher after iphone shipments to china jumped 58%. affiliated with the chinese government and shares set to snap a four month losing streak, longest since 2018 back around the 190 level. meanwhile, semis hitting new all-time highs again they say it's a leading indicator. watch it closely micron, nxp, qualcomm, kla in the green. the smh trading at record highs down here, again record 250, up 40, 50% since january. pretty impressive moves. still ahead, near term options in a abercrombie say 15% in either direction is coming our way. and dick's has beaten on the top line in 18 of them and with 18%

short interest is chewy set up for a short squeeze, we'll find out in our earnings edition retail coming up next ♪ ("tosca, act ii: vissi d'arte" by maria callas) ♪ ♪ (orchestra del teatro alla scala, milano) ♪ ♪♪ ♪♪ ♪♪ ♪ ("nyash" by jaden holder) ♪ ♪♪ ♪♪ after last month's massive solar flare added a 25th hour to the day, businesses are wondering "what should we do with it?" i'm thinking company wide power nap. [ employees snoring ] anything can change the world of work. from hr to payroll, adp designs for the next anything.

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welcome back to "the exchange." it's time for today's three buys and a bail and we're digging into the retail names about to report joining me now is gina sanchez, chief market strategist for alito advisors welcome to you let's start with abercrombie which has made an amazing comeback over the years in decades. the shares are up 400% just in the past year, as denim is totally back in fashion, but investors are wondering whether the company can keep up the momentum should you buy it here >> so abercrombie is interesting. they have been very cautious in their guidance, i think all of the trauma from the last several years, however if you look at the fundamentals they are very much set up for a beat, but also expanding their margins. they've been able to raise their prices with the trends in their favor, but also costs are falling. i think all in all they're setting up to be one of the

stocks that can defend well if we start to see a softening consumer. >> so i mean, look, 18 p is pretty remarkable given the run they've been on. not that high yet. maybe the denim trend has legs chewy down 45% over the past year but wedbush sees modest upside potential this one is heavily shorted as well. >> yeah. so this is an interesting one. they've been losing active accounts and i think is a part of what has been feeding a lot of that shorting behavior. you've seen them expanding their net sales to the current accounts that they have. they're going into a season when they should go into easy comps and that in and of itself could make some of those shorts reconsider, and, you know, the bigger challenge is whether or not they can sort of fix their operating margin, and it seems as though they're starting to

sell more profitable channels on the chewy platform and so if that is the case and they start to make up some of that negative leverage they have, that could also be very beneficial in the long run combination of easier comps, selling more profitable products, they're moving in the right direction. >> given what's been going on with the meme stocks we'll see if we get big action your final buy dick's up 33% this year, why >> yeah. so you know, dick's is one where they've been hit by, you know, by increasing costs. however, they are -- they've also had very, very strong sales and a lot of that is seasonal sales. they might go into sort of a harder comp season, kind of going near term, but if you sort of stretch that out over the year, they should be able to make up and get back to strong profitability. the outlook for dick's is still quite good. >> your bail advance auto parts

my company, they just, i don't know how we fix them at this point but you're staying away. >> so yeah, we're staying away because they have been trying to execute a strategic pivot in order to fix the profitability problem, but they're doing it at a time when, quite frankly, it's been a great time to be in, you know, in sales right now selling to consumers and they haven't benefitted from that we're going to a time when that should soften, so that pivot is going to have more headwind. this is a challenge that could take them years, not months. >> north carolina based. we got to see the factory or some sort of regional headquarters in college. you never forget those, the first time you go on the trips appreciate it very much. we'll see how everyone comes in when they report their earnings. gina sanchez with leeto advisors that's it. i will see you next por on "we lunch" with tyler mathisen right after this break

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now? no pressure. it can. on the servicenow platform, ai transforms your entire business. your people work better, your customers are happier, and todd... well... he's practically euphoric. practically. because when your people work better, everything works better. so what are you waiting for? let's get to work. idris elba works here? mm-hmm. ya, he's super nice. hello way up there and welcome to "power lunch. alongside kelly evans i'm tyler mathisen markets split today. the nasdaq soaring to a new record high, while the dow near session lows, coun nearly 300 points health care dragging on the dow, accounting for half of the dow's losses >> the nasdaq is