they bought 90,000 calls out there just at the 15 stripe with the stock at $14 that's one of the biggest trades in equities we've seen in a long time i don't know what's behind it. but as a surfer, i run with the wave and try to get on it. so, i'm on chargepoint >> good weekend. "the exchange" begins now. note ♪ ♪ thank you very much, scott hi, everybody. welcome to "the exchange." i'm kelly evans. 390,000 jobs added in may. more people coming into the labor force. average hourly earnings up and no real sign oofz slowdown does the fed have to get more aggressive head of the cleveland fed will join us with her take on the numbers and what it means for rate hikes

and we'll hear from someone on the hunt for goldilocks stocks she will name names. stocks are falling dom chu has the latest >> not falling as much as they were earlier in the session. keep can in mind we're decently off session lows they're off about 218 points the s&p 500 sits at 4124 50 points to the down side off about 1 and a quarter per sent down 256 points. energy, far and away the best performing sector. only one in the green. that takes us to the week today look over the course of the past week, energy has still been the stand rout momentum play up 1 and a quarter percent and discretionary on a relative

basis. health care has been the real laggard over the past week that's the way it's played out so far and a lot of focus on the mega cap stocks, especially when it comes to apple and tesla those two stocks, with apple being down 3.5%. tesla down nearly 8% two of the biggest drags in the s&p 500 and nasdaq 500, apple has specific issues regard to whether or not interest rates going higher could take the shine off the growth and more company-specific stories with regard to concerns about growth on the services side of things for apple and we've talked about elon musk and the job cuts happening what it could mean for the company and the fact that he has a soured outlook on the economy. those two stocks key focus for the traders going to the afternoon and into the weekend. i'll send things back to you >> now, my next guest says the

labor market is slowing. i would argue it's not slowing nearly enough right now. let's take quick look at the data for starters, the key bellweather manufacturing index, that surprisingly rebounded to a read of 56 this is hardly the sign of a slowing economy. good is good and bad is -- you know what i'm saying here. it showed almost 11 million openings after the previous month was revised higher still showing very strong, very hot labor market on top of that. and jolts is lagging but yesterday we learned weekly jobless claims, remains incredibly low at 200,000. that's despite the layoffs we know about in the world of crypto and tech. the monthly jobs report was strong hourly earnings up 5.2% from a year ago up for nonsupervisory workers.

it's sort of good and bad, depending on the point of view you're coming at on what the fed will have to do. they report this morning an increase in theemployment component while the overall rate remains just below 56. so, we'll hear what the fed thinks of all of this in a moment but first he is rbc's chief u.s. economist. did i convince you >> i do appreciate the effort. i will say that. it's good to be with you >> it's good to have you here. tell me what your takeaways are on the labor market and the pace of fed hikes do you think it's going to slow into recession the back half of the year >> the degree to which it slows, that's where the debate is and is where we should be debating it look, i think this number was

north of consensus and came close to ourb number you're starting the process of slowing down anytime we have this conversation, people want it now. it doesn't really work that way short of turning the economy off like a light switch. it takes time for it to develop. and i think the labor backed off in a different spot. it's not a hunch one of those things we're looking at b i think there's a couple of things jobless claims remain low and they seemingly have put in the lows already b i think again it's an early sign they are starting to slow down one of the things we highlighted yesterday is if you look at something like facebook. we have a facebook labor shortage index that has slowed in a pretty meaningful way and if you layer on top of that,

something like the conference board labor differential index, that is now in the midst of seemingly swelling i think there are a lot of indicators that suggest we're moving into a slower plain here. >> but are we all being confused by the second derivative effect. doesn't mean inflation's nart going to be with us for a long time none of this points to us going back to 2% inflation anytime soon >> and you're speaking to someone who thinks inflation will be quite a bit lower than what peep vl been talking about. even i don't expect core inflation will get back down to 2% i think you'll get to a slower pace and i think it could be a pace that makes the fed feel comfortable. i would define that as you're holding a three handle oncor inflation, i think that would make the fed feel comfortable.

for all the things everyone seemed to focus on i think the most interesting thing she said actually related to the idea they're now -- or she is focussed oncor over headline inflation that creates a much lower hurdle to feel more comfortle with ices >> but are you saying you think core inflation is going to slow from 6% to 3%? there's only seven months left in the year. >> only seven months the only part i have a hard time with you have to keep in mind if you look at the goods complex, you can easily see a lot of the components it's a great example of we'll start the process of slowing in earnest as the year starts to progresses the forecast is 6.8% so, i think yeah, that's

actually not a hard case to make, given the fact you're going to see disinflationary portions show up in the goods compoinants. you're still elevated. is that something they need to start to outline >> i would with like to hear them talk more about the transition from goods to inflation. air fairs are way up pretty much anything goods or services continues to be, more or less, record highs. you have labor market. that's why we're focusing so much on the labor market you want the cost of child care, elder care, with you name it that's going to come from a fight labor market and it's only pointing higher. >> one thing i would highlight is particularly the air fairs. they rose near 20% last month. 11% the month higher it took a 20% month on month gain to show up a 10th of a

percent gain in the headline think about that the weight of the service components are really small. the single biggest weight in inflation in general and certainly services is the shelter component. so, again, if i think about airlines, air fairs, think about one of the easiest things to cut from your discretionary spending is if prices get too elevated. something like air fairs we have air fairs embedded in our current month forecast there's one month it falls hard and forecasting trickier i have no reason to believe it will happen anytime soon still ala lot of demand for travel >> team kelly or team tom. it's a joke. your the economist >> i love the idea

>> really good counterpoints and thanks for the discussion. and i'm glad the sun came out behind you demand destruction has already started as inflation takes a bite out of consumer wallets that's looking for goldilocks stocks that are not too hot right now. nancy, real quick, what kind of environment are the picks suited for? the inflationary cooldown or the persistence that i'm worried about. >> i think they're best suited for the inflationary cooldown, particularly where growth is slowing but we don't go into a recession. we agree with what tom was saying that we're seeing the beginnings of price declines, cost declines and a number of the commodity areas. we're seeing it in lumber and cars we know many of the retailers

are over inventoried we suspect double ordering and building in semiconductors and those will all lead to better pricing and costs for companies and for consumers going forward but not so much that it causes the economy to tip into a recession. as a result, we want companies that are not as dependent on consumer spending but are being driven by some of the forces reshaping the american economy for the next few years >> i appreciate the warning if you will that you need a healthier inflation outlook. and this is a real theme for us. these are the sort of under the radar plays that a lot of investment managers are looking for right now. mrc global what are the criteria that get you to these picks

>> so, what we're looking for is, in general, companies with good revenue growth. fwlrs it be government spending and the interest in clean water that they're benefitting from. fwlrs it's from reinvestment in our energy grid plus a green tech play there arizons they in in carbon capture. and with companies that are making money, positive on free cash flow, where the investors can see the return on the am vestment today and not just in the future >> what do you make of all the comm comments we've gotten? everything from elon musk talking about how he's super worried? is jaime diamond worried a

hurricane might be coming. what does all of this tell you >> so, we are concerned. we are going to see a negative cycle in sillicon valley whether it is in the money losing, very high growth companies in a lot of the health care companies and some of the ev and sustainability companies we've had a large venture capital cycle. for and i think some of that is being reflected in what the ceo's are saying i think everybody needs to take a pause and remember that an economic slowdown does not necessarily mean we're in 2000, 2001 or 2008 or 2020 this looks to us much more like a garden variety recession where we'll have pockets of weakness we think sillicon valley is one that's relatively weak

middle of the country. we heard plans from ford about expanding their manufacturing plants >> true. >> i hate to say that the ceos are being reactionary to the headlines, but it does feel like there's hyperbole here. it's more a garden variety recession. we believe the market has already discounted, particularly to small cap stocks. >> i appreciate your comments and strategies for investors desperately needing them right now. nancy with essex investment management is buy now, pay later flashing a warning on consumers plus the first fed official to react to the jobs report cleveland fed president joins us

with her take on the numbers and what they suggest isabout the economy. with the dow down 200 points and the nasdaq down as the 10-year rate climbs back up. almost at 296. we're back in a moment what if you were a global energy company? with operations in scotland, technologists in india, and customers all on different systems. you need to pull it together.

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♪ welcome back to "the exchange." buy now pay later was one of the big innovations that boomed during the pan dem, helping send commerce spending soaring. and now asome of the worst performers in the market paypal and the massive slugging performance. sharon is here with that story lisa ellis is here with our trades if we can set it up that way sharon, let's start with you >> well, rising interest rates are growing. missed payments can be big problems for buy now, pay later companies. lending tree found 43% buy now pay later users said they pay late on one of the loans depending what lenders do next

could impact your credit score >> some will report the default and the delinquency to your credit reports they're all going to come after their money. no question about that >> well, buy now, pay later companies generallial don't report to the credit bureaus when consumers use these loans ken canth len says that can create a major issue when it comes to undering consumer's total debt burden. >> the challenge is is you don't know if you have 10 other loans or one other loans and that make as big difference in how much you should loan and potentially pay back as soon as you start flipping backward, you can be in a situation where you lose control of it. >> and he says that's when consumers can get into deep trouble, can kelly >> so, what happens if their

debt starts to snow ball because they can't afford payments some of the the platforms will say you can't spend on ours anymore but there seem to be others you can pick from >> yes-there are others and you may be charged fees if you can't make payments and in some cases reported the credit reporting agency that could definitely impact your credit history and your credit score >> for sure. and our next guest says inflation is a big problem for these payment players. but she has two upside plays that could weather the storm great to have you back you want to start by responding to the same question, which is why have the stocks been hit so much it's just the fed. nothing company specific here. >> it's a lot of factors certainly liquidity and the fed. these are, in many cases, high

growth, less prophetable firms and they've been caught in the general pull back. there are concerns about inflation, which hit the middle income consumer heavily and they're the target market typically. in addition, regulatory concerns for all the reasons i just highlighted a minute ago, they're starting to lean in on putting regulatory guardrails around the products that is creating uncertainty around-the stock. and thenthere's the questions about the credit book. they may be fantastic and they may not be no one knows they haven't been through a credit cycle >> who do you think is best positioned among the best standing names we're talking about? >> we like block the best.

block bought after pay, the big australian player. one, yus on a stand-alone basis, after pay is really only in the very short duration pay-in for model type of loan so, they have limited down side risk in their motto. they're not in the longer duration installment loans they're the pay in for model and in addition, incorporated in the broader block company. and there's a lot of naturalal synergy that might buffer the after pay. on the flip side, we're a little more cautious on affirm for the reasons i highlighted. as much as we're pretty positive on the outlook as an offering, a credit offering over the medium to long term, it's been innovative consumers like it. we see near term head winds,

regulatory, inflation and general pricing pressure, l particularly in the u.s. market where it's gotten quite competitive. >> and what do you expect is going to come down for regulators >> what we're likely to see at minimum is clarity on the marketing language as we've seen in the past with credit cards, we have to be super clear about exactly what they're signing up for around late fees, interest, whether it's going to show up on the credit score sometimes the messaging can make you feel like they're getting a discount, when you're just paying for it in multiple installments at a minimum, providing clarity around guideslines and issall esoaround when and when not they have to be reported to the cr credit burrows and as the prior guest highlights, it's inconsistent across the firms right now

so, they're dealing with uncertainty about whether or not it's foeing to effect my credit score or not >> giveen the reasons why you're bullish on block, do you think affirm will end up as part of a larger company >> i think there's plenty of suitors, plenty a of companies that would be interested in affirm because they've got fantastic user consumer base, great partnerships with amazon with shopify, for example. and really more management of whether they would be willing to sell or if they prefer to go it alone. we think somebody like an american express would make a fantastic suitor for somebody like affirm. but any of the traditional credit card issuers could be soorters or someone like a pay pal. it's probably more in the hands of affirm's management and

board, their willingness to go in that direction. >> could be a catalyst but i'm sure not many want to speculate on that front. thanks for all your thoughts the affirm co founder and ceo will be on tech check monday at 11:00 a.m. eastern coming up, here to rethookt latest jobs report and give us her outlook for rate hikes and in the meantime, energy prices keep soerg parked around $119 a barrel. more inkrcreases in gasoline futures. and chevron ceo saying there might never be another refinery built in the u.s as we head to break, a quick look at the dow heat map as it's down 250 points.

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welcome back to "the exchange." they are down across the board the nasdaq is down 2.4%. watching micron shares after the down gride underweight, they cut the price grade to 70, blaming oversized exposure to other consumer end markets seeing negative macro economic trends and new shares are down 7% american airlines in the red whileal they trimmed their capacity eguidance and raised

fuel cost estimate ael shares down 7% and the best performer on the nasdaq today the management software company posted better than expected results. and they araised their revenue forecast for the year and the shares are moving up about 6%. our deal of the day is bristol meyers squid and in an effort to deepen its pipeline in the lung cancer treatments, $76 a share in cash. that was more than double turning points closing price yesterday. and there's the ceo of bristol meyers we'll speak to him at the top of the next hour on "power lunch. tyler. nice anytime your stock doubles in a day let's talk about the headlines the u.s. and russia may be at odds over the invasion of yew crane but the two countries are still cooperating in space, at least for now. the russian cargo ship arrived

at the international space station carrying nearly three tons of supplies hurricane season underway. tropicalal storm warnings have been issues for florida, cuba and the bahamas this weekend tracking the same storm that battered mexico as hurricane agatha this week will get a new name, alex, when it hits the atlantic more on the news with shepherd smith at 7:00 p.m. eastern time. kellogg will not face a lawsuit involving its popular breakfast treat, pop tarts kellogg was with accused of defrauding customers because the chocolate fudge tarts did not contain milk or butter but the judge agreed with kellogg's arguments that the marketing nearly suggests that it tastes like chocolate and the judge dismissed the case the cake the cake

>> i got am to an arg ypt about those pocky sticks because i said they don't taste like chocolate but they're supposed to be but they don't >> this one went to court. out of there >> tyler banks, we'll see you soon we'll speak exclusively with loretta mester does she agree that inflation hasn't pavled and the economy may have to take a backseat to tame it? wealth is shutting down the office for mike's retirement party. worth is giving the employee who spent half his life with you, the party of a lifetime. ♪ ♪ wealth is watching your business grow. worth is watching your employees grow with it. ♪ ♪ only at vanguard, you're more than just an investor you're an owner. that means that your goals are ours too. and vanguard retirement tools and advice

can help you get there. that's the value of ownership. right now, we're all feelin' the squeeze. we're having to get creative. find a new way. but birthdays still happen. fridays still call for s'mores. you have to make magic, and you're figuring out how to do that. what you don't have to figure out is where to shop. because while you're getting creative, walmart is doing what we always do. keeping prices low for you every day. so you can save money and live better. ♪

stocks are selling off as they invest high jobs report wages continue to rise the numbers reminding investors that the fed has plenty of runway with the economy to continue to raise rates. joining us now is cleveland fed president, joined by our very own steve liesman. >> i think you might have just stolen a line from our guest about plenty of runway thanks for joining us, president mester >> thank you thanks for having me every report these days is

viewed as an inflation report. >> it was a strong report. shows there's still strength in the labor market we see is activity and in the labor market i think having the number come in, the headline number come in lower than the previous month is a good thing but it's too soon to tell if that's going to change the outlook on policy number one problem remains high inflation, well ab above acceptable levels. and that's got to be our focus going forwrtd. we're committed to using both our tools to get the inflation rate down. so, the moderation and is wage growth, that's not a bad thing that's a good thing. it shows persistent tempering of

the underlying demand, which is outpacing supply before we can get the price pressures down >> we brought the inflation aspect you have 230,000 people come in. the adjustment in january. i don't think that's counting us have youb given up the hope there's going to be an influx of workers to solve the inflation problem or loosen up the job mark incident. >> i think we're going to see more participation come back but the trend, is the dow is down and we're not that far away from that. i have never been of the view that we're going to have is a savior come in and bring everybody back at the labor market we know people have come back. we've seen labor force participation increase wore going to have the demands

adjustings the excessive demand and have something go on in the supply side it would be great if we see labor force participation moving up and great if supply constraints eased because that will help balance is supply and demand but we can't rely on the supply side doing the work. that's why we need use our tools and we've already started the process. sglits kelly here and to pick up on that point. why not rytry to get to neutral this year? with such strong trends growing at almost 10% ag ruigated, based on this report shortages wore worried about exacerbated by ukraine but just demand relative to supply. so, why not take it up 75 basis points or a full point or get more to neutral in the next

couple of months >> we're on a path to bring it up quite bit as the chair indicated, where he is, another 50 at the next two meetings and i think tllts appropriate. i think we've got to be moving up and on a path and being intentional and consistent with it we do know the economy is having pressures kpaujinous to monetary policy happening as well bring interest rates up, keep that going look at how demand is reacting to that. we've already seen tightening of financial conditions and that will help temper demand. we know things are are going to happen on the supply side. we know the war in ukraine has raised a lot of commodity prices, including energy and the covid lockdown with china that has also disrupted the supply chains. and i think the fed has shown

we're in the process of recalibrating our policy to get inflation back down to our 2% goal and that's the job before us we're going to use our tools to do that. now, it will take some time to get to the 2% goal so, what i'm looking for is the monthly readings on inflation to see that they are starting to come down. i don't want to declare victory before i see really compelling evidence that our actions are beginning to do the work of bringing demand into better balance with aggregate supply. >> my turn i want to ask you about comments that have been made. elon musk said things are about to get super bad jaime diamond from j.p. morgan said wore bourt twe're about to hurricane.

how do you respond to ceos who say something like that some and is it posbible we end up faking our way into a recession in a sense that these guys have our their fingers on a variety of key economic activities and if they pull back, there's going to be a pull back and the third question is what is your outlook in terms of avoiding super bad and a hurricane? >> i don't see a hur cane. but we have to realize that the risk of a recession has gone up. wore in the midst of recalibrating the monetary policy there's a lot of other things happening. growth in europe has slowed. war in ukraine is effecting the economy. so, we have to be eyes open at the risk of going up nonetheless. i still think a good case can be made that we moderate demand and price pressures back that

contain and keep law and order inflation and really get back to priceability over time so, i don't necessarily -- i've always listened to everyone in the economy has an opinion and you're right, people running companies -- and i listen to that we have business contacts to see what they're doing in their businesses b i can tell you from the district, they're more pessimistic the way everyone is the uncertainty around the outlook. but they're still a book of business and facing supply shortages because they want to do activities. still facing hiring constraints that they really want to hire. so, again, there hasn't been a change in the underlying demand momentum in the economy. but it is a struggleal to get the supply and demand back in balance.

so, that's why recession risks have gone up and we have to be cognizant of that. >> we have to squeeze in two more quickly, what does clear and compelling progress on inflation look like? to see gains on the headline or core of only three-tenth, two-tenth or measured on the delta or the cpi verses the pce? >> i'm looking at plethora of measures on inflation. b i want to see is the monthly numbers, monthly increases on a downward trajectory. of course, you have base effects that effect that it's going to be important to see that consistent moving down. and we know monthly numbers can be up and down i want to look at total inflationb numbers the median cpi that the cleveland fed produces i want to see all those numbers. and i'm going to use that to

give me a sense of yes, we are doing what we intend to do with our policy tool and moderating demand and getting price pressures down it has to be across different measures and more than one or two months i haven't seen that yet. we've seen some of the numbers come town and go back up the next month i really need to see compelling evidence before i would say -- declare that inflation has peeked and we're on a downward trend. >> and this is a wonky policy part of the interview as well. i'm going to follow that up with another question on the same lines. there are people who suggest you could bring the funds rate up quite naturally, as high as 4 or 5% and hey, the ought to be a 1% positive rate on the funds rate or half a point. two or three percentage points,

pick your number,b for underlying inflation and 1% restrictive. that gets you to four orb five pretty easily. a,side the be positive b, restrictive and why wouldn't we price in a funds rate that would go that high >> i think point you're trying to make is when we look at the long-run nominal fed funds rate, that's meaning we're at 2% inflation. we're not at 2% inflation. so, if you adjust for inflation, which you do to create a real rate, real rates are negative. and that's what's happening on the demand side of the economy i think people arguing for that say we need a real rate above zero i think what we're if wing to do over the next couple of meetings is bring the funds rate up by 50 and i'm in that camp unless

things unexpectedly changed. and then we're going to assess how much is demand and supply and balance? where is that? that's not trivial it's going to take lot of looking a that data and analyzing things but i'm going to come into the september meeting. and if i don't see compelling evidence, i can easily be up50 basis points in that meeting as well there's no reason we have to make that decision today but my starting point will be do we need to do another 50 or not? have i seen compelling evidence it's on the downward trajectory? then maybe we can go to 25 i'm not in the camp that thinks we stopped in september. i think we need to bring the funds rate up and we probably will have to go above that long run fed funds rate in the set to get inflation back down. >> thank you so much

>> tremendously. >> miss kelly. >> come back, president mester just to delve into this any time that wasbate for chgel coming up on "the exan." it's been a rough 24 hours for this asset and if one of the pioneering companies is right, there could be more pain ahead

♪ welcome back it's been a tough 24 hours for bitcoin. for it's down to below 20,000 again today cracking down on crypto mining a bill banning operations that run on carbon-based sources. this as the twins announce a 10% reduction in staff at their crypto exchange gem nigh twins warn it's in another crypto window and gemini is being sued over it the bitcoin futures. coinbase saying it's extending

the hiring freeze for the foreseeable future and it's been a tough year for miny bonds but a definite change in tone the past week is there still time to buy at discount

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welcome back it's been a tough year facing a loss of 7.5% so far since january but now seems like investors are creeping back into the market it's the start of a real bull run or a temporary boost joining us is u.s. public policy strategist the flip side of those loss is yields are much more tantalizing, shall we say. >> i think that's fair you mentioned that the bond index is down about 7.5% it was down 10% a couple of weeks ago. we think that's durable. we think credit quality is durable. the relative value in the asset

class is pretty good even after you've had big moves like that which are very uncommon, five out of the last seven teimes, the next 60 days are still pretty good from a relative performance stand point. we're still feeling pretty constructive >> giventhe yields now, a couple of weeks people were saying that's the equivalent for a pretty safe asset class. are there still opportunities? >> sure there's still opportunities. i do think it's fair the say that the best opportunities were a couple of weeks ago. the problem is when mutual funds are losing money because of outflows that tend to be when the best valuation opportunities are. as you mentioned earlier, that's starting to abate. that's starting to abate because said policies become more predictable and the individual

investor appears to be less concerned about own bonds in general. as individual investors put more money back to work, the market also adviser to perform. >> they may not be concerned about the paper losses if they think they can pocket adjusted yield. on that basis, it's possible we could see continued pressure on near term performance if rates go back up we're going to see similar pressure come back on the asset class. >> yeah. i think that's fair. they realize negative returns especially in volatile fashion.

>> all right thanks for your time today appreciate it. >> thank you still ahead, what do amazon, google and tesla all have in common planned stock splits what it means for the companies and who else could be on road to splitsville. that's next.

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welcome back amazon 20 for 1 stock split takes place on monday.

>> amazon shareholders will have 19 additional shares for every one share. it's the most prominent since apple under went 4 to 1 in 20. money managers say it can provide a short term psychological boost. amazon said it would make the share price more accessible. research shows companies that under go a split out perform the broader market by 16% on average be year after of all sectors tech and consumer discretionary stock tend to see their prices rise the most. tesla, although it hasn't announced a specific date of yet and game stop. booking holdings at the top of the list

followed by auto zone, chipotle, among others >> those are potential next targets. thank you very much. before with go, we did ask the twitter world who won the inflation debate the head 7 is% of 23%. it's my twitter. got a lot of homers. we got to get the tom crowd out there. we'll dive more into inflation especially into gas prices on power lunch which starts right now. congratulations on that smashing victory welcome to "power lunch. here is what we got this afternoon fp labor market continues to sizzle. good news on the jobs front. sometimes not such good news for investors. should you stay defensive? our market guest says yes you should