every trade i've got. >> you guys, you're all good c'mon, for me. >> we are, good friends, good friends. liz? >> consumer discretionary. again, i'll see you if "overtime. "the exchange" is now. thank you, scott hi, everybody. i'm kelly evans. here is what's ahead relief rally stocks are higher, as we count down to what feels like a fairly predictable decision next hour from the fed are we being lured into a false sense of calm? will chair powell double down on his inflation flight, even as markets believe it will prove short-lived. rates rise, so are cancellations to built new homes taylor morsing is the latest to report a slowdown.

and in earnings, it's meta, of course, it's also ford our trader pounds the table for stanley black & decker all coming up. >> the rally is pretty strong here, kelly. ahead of the fed, you wouldn't think you would be this dramatic, but maybe where we come from has to do with where we are right now it has been decidededly negative with the market narrative. today's gains kind of put you back toward the middle of the trading range. 16.3% declines a nasdaq composite some of those strong er move, a the highs of the session to the composite index.

so tilt ing speaking of, check out, always a huge focus, as we talk about the decision daze yields are up higher to 3.7% just a bit below 2.77% between the two and the ten-year, big cap and big financials, always a big focus jpmorgan chase, bank of american, kind of holding pattern, if you will bank of america, kelly, up about

0.2 that's our pre-fed state of affairs. >> we have less than an hour steve liesman is standing by i always like to see what you're going to ask them, steve. right at this time, among those questions first, how does policy re react the futures d. a full percentage point by year end, but after peaking out at what you call it, 241, 243 right now, you can see fairly aggressive rate cuts are build in that would bring the funds rate down below 3%.

how to put out yesterday it said the more the regard -- the let effective powellic ar that is easing financial conditions. so take a look at some of these forecasts. and still the outlier. moran stanley up l at least from these forecasts, that negative growth for the powell.

we don't have a framework. we'll have to wait until powell has a better inflation >> i think we need to know how it -- and whether the market has it right steve, thank you so much we'll let you go take a listen. >> jerome powell can't fix everything but if he uses his one tool very aggressively, he runs the risk of having the fed push or economy into a recession. here now to response, charlie is vice chair of ariel investments

and francis donald is chief economist and strategist welcome, everybody charlie, you want to respond to that and what do you think the fed should do here >> i hope you're sitting down, because i actually agree with fluorwarren, which may be a first for me. >> wow. >> she's absolutely right. the fed can't do anything to bring down inflation, but they can cause a recession. the reason we have this inflation is we had a massive in in increase in the money supply the did news is the money supply has stopped going up, so we are on a path to control inflation, but all the fed can do now is throw uninto a recession and that's not going to be helpful. >> you think they should do nothing at this meeting? >> no, i mean -- right now we have such negative real rates. this inflation environment,

having this interest rate environment make a lot of -- and so they do need to be higher, but i really do wish he would stop talking about this being an excessively heated economic causing inflation. that's not what we have now. very interesting so much i want to circle back to and unpack there francis, i think you have a very similar point of view here you're worried about the economy slowing. do you think the conversation should be and will turn to rate cuts so literally the conversation will turn to rate cuts the economy will slow materially, but is that enough for the fed? the big question for me today is what is the fed's decisionmaking function going to look like? we know they're very focused on the inflation story. should they be i agree with my colleagues here,

so does fiscal, so does supply chain. but as we head into the next 6 to 12 months, we are going to see the initial jobless claims rise will they switch back towards focusing on the dual mandate i suspect later this year we'll see it, but not today. >> i do think that bill acman makes an interesting point, that the market reacts too quickly to use the playbook from the last slowdown, and it's not clear that inflation will actually let them do it there are plenty of people who are skeptical that inflation will be low enough it would even makes sense to start talking about rate cuts. what do you think? >> i think i agree with the last comments in some respects, i think the market is getting ahead of itself to me the concern is if they do overshoot and go to 4% or 4.5%,

then there's a heightened risk of a hard landing or sharp slowdown in the economy that would warrant them to actually cut rates soon after they sort of overshoot quite dramatically. a better policy prescription in my view is if they sort of get the fed funds rate to 3 or 3.25%, and then take a measured data-dependent approach. after that, aggressively afterwards, doesn't make a lot of sense to me >> do you think they'll go just half a point >> no, i think one of the things they have learned is you don't really want to surprise the market either direction. i think they've been tell graphs 0.75 of a point, which i think is the right thing to do interest rates were abnormally low. they need to be higher

if he does something silly today, he will lose confidence, and i don't think he wants to do that. >> you would call it silly if he goes less than three quarters of a point? >> yes that's be him saying inflation isn't as bad as everyone can see. we need to stay on the path of modestly higher rates until we gets inflation relief. and, by the way, we're going to get better numbers the year over year numbers will still be high, but they have to the rising as fast as they were before. >> there are places where we're seeing pressure, core services, that are way less visible, but nonetheless will be there into 2023 what's your own projection for inflation? we were above 9% last month, or call can 6%, 7%.

where do you think we'll be. >> we have it coming back down to 2%. but the story is the composition of that inflation looks likes. the fed can bring down many elements but they're going to have a heck of a time bringing down food and energy inflation, and shelter will come down with a lag. i suspect we'll see bifurcated inflation into next year this is why the last meeting with powell was so important if they want to change their tune, they can start talking about core inflation being important. that i would view as a dovish pivot. look at the composition and how the fed speaks about it. >> do you think we'll be at 2% inflation one year from now? >> yes we could very well be between 2% and 2.5% inflation a lot of that will be based on facts and goods priced it won't be a reduction in

prices we have crazy high prices which are hurting consumers. we won't see those unwind, but just grow more slowly. that would be a challenge for the consumers going, and make central banks' lives more difficult. subadra, what is the market pricing at do you think that is realistic >> the market is giving the fed a lot of credibility if you look at break-evens, below 200 and 50 basis points, the market's basically saying over the longer run, break-evens are suggesting that inflation would remain relatively contained below 250 to me is a pretty good you're seeing the same thing in terms of inflation. so they have also come down quite meanfully, so, again, you know, that sort of context

i think the fed should feel very comfortable with its current trajectory of raising rates from floating rate hikes, and then taking a much more graduate approach >> to get there so quickly, do you think the level of the ten-year makes sense 277, let's call it >> that's a good question. it feels like we reached the peak is the ten-year part of the yield curve is starting to price in risk reversion. you're almost seeing every other metric in the universe starting to invert as well. the only metric that hasn't gotten close is the three-month ten-year part of the curve based

on the signals he's getting, and that's what i think is going to keep yields relatively capped. >> charlie, we started with you, we'll close with you do you have any parting words for stock investors? >> it does not make sense, it hasn't for the last three, four years, there's no reason why 2.7% back. you've had negative real return owning government bonds for the last four, five years. it makes no sense. they're going to go higher the historic number is closer to 4%, which is where they should be. >> even though you think the fed -- i'm just trying to square that with what you said a moment ago. >> the bond investors deserve and have always gotten a real return the last three or four years they haven't right now the rate is have i low, because people are fleeing to safety. so they're buying a low-rink asset, which is fine, but

they're not getting enough of a return on that over the next ten years, we're going to average november of 2% in inflation i think it's going to be significantly more than that, so therefore, the rate, as you asked me, isn't fully compensating people for the inflationary risk they're taking. thank you, everybody we very much thank you for your time today we want to mention shares of visa and mastercard which are at session lows on a "wall street journal" report saying that senators durbin and roger marshall will introduce a bipartisan bill aimed at credit card fees. it would allow them to process over different networks. we have reached out to both companies. visa shares are down 2.5%, mastercard a little less than 1%. coming up we'll have the ceo of stifel if he thinking the fed is tightening too quickly. plus metashares seen a

relief rally is the bar higher now for their report this afternoon? we'll tell what you to expect and what other key reports we are watching. as we head to break here, the dow is up 0.25%, the s&p 500 is up 1.3 ii, nasdaq um 2.5% as we await the decision the top of the hour we're back after this. snoo

. welcome back to "the exchange." were 41 minutes from the fed decision before june, the chairman of stifel warned us the fed could trigger a meltdown in the markets if they tighten too quickly, saying a pause might even by warranted. the stock is trading down about 2% on an eps, though revenues were in line joining is the chairman and ceo of stifel. it's great to have you back, ron. welcome. >> hey, kelly, how are you >> you know, i'm good. there's a lot of confusion and a lot of different perspectives about what the fed should or shouldn't do are you now in the elizabeth warren camp now? >> let's take a different view here fee second. it kind of is, where are we?

i would say we tend to not repeat the mistakes of our parents, but our grandparents, in not looking back. is this inflation we're looking at today is this '70s-like inflation, or inflation that occurred like after world war ii let me remind you, right after world war ii, it went from 2% all the way up to 14%, and then back to 2% huge expansion of the money supply after the war, and reopening of the economy look, covid, we spent as much as we did in world war ii, we have reopened the economy, inflation really spikes. i suspect this is more like '46 than it is the '70s. that's the perspective that i bring to this. >> i think it's an interesting one. i guess the key question to ask

is, how did inflation fall that quickly? what was it in the '60s and '70s -- there are some similarities to the redistribution effects we saw after the great society in the '70s and what we witnessed with the redistribution of the stimulus today >> well, in the '70s, the economy was much more closed, a lot more regulation. you know, a lot more entrenchment of labor and cpi increases. inflation was a lot different in the '70s what happened, again, after the war -- again, we just have had a war with covid -- it was the confluence of a huge expansion of the money supply with a reopening of the economy i think they're very, very similar, in terms of circumstances, and, therefore, i would say that inflation is

going to come down a lot faster than what people would think of it being entrenched. that's something that we have to think about, kelly, especially with what the fed is thinking about. let's use stifel as an example how much is comp up year on year, and how much do you expect it to grow or are you shift into a hiring freeze or maybe even a layoff mode >> well, i don't think we've ever had a layoff in my 26 years here we're a growth company and we're always growing i don't think that way, even though we've been through a different market here in the first six months we're growing. our comp is very variable. as a base case, you know, we raise comp up 4% on base salaries, and that needed to be done we've had a suppression of wages because of the low inflation i don't view that as some of the, you know, base that inflation is going to be

climbing 8% or 9% --%. i think inflation will come back down the fed will raise 75 basis points last time we talked, i said they should be low. >> yeah. >> i think they need to look now at where the terminal rate should be. the market things the terminal rate should be 335 at the end of the year the 30-year is at 3%, the ten-year is at 2.77. i personally think the fed has to raise rates, but that last basis in 25, i think that last 25 could be on the table not to happen. >> oh, sure. >> get to 3%, we shouldn't be pushing it, or should be much more data dependent. >> we're still talking about a doubling of rates from here and the pace picking up considerably the final question, i notice that you guys are seeing bank

loans up can you talk about that? all of this we've had asset prices and demand driven by the fed. what are you seeing in terms of actual demand for bank loans and credit in the economy. who are those trends like right now? >> well, i mean, they're dampened, but we still see demand we still see good long growth. the economy and the markets are adjusting to higher short-term rates. you know, we saw that. look, kelly, the market was down, inflation adjusted 20% in the first half we thought and we put out a call when the market was 3600, we thought the market would raleigh to 4200. we stand by that call. we think you could sigh some stimulus in the market with the fed signaling. and if we got a cease-fire in ukraine, that could be big on the up side.

>> you've really never laid anyone off in 26 years >> we've not -- let me put it this way we've ended every year with more people than we started. >> wow growth mode, like you said we'll let you run the whole economy. thank you for your time today. always good to check in with you. >> kelly, good to see you. coming up, higher rates usually mean trouble for emerging market. just look at the ten-year, but some countries are finding a work-around. how are home builders dealing with higher rates? the ceo of taylor morrison join you with full details. in any business, you ride the line between numbers and people. what's right for the business and what's best for everyone who depends on it.

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welcome back, everybody. here's your pre-fed snapshot the nasdaq up 2.5% after better than feared big tech earnings. 3972 the level there, the dow trailing with a quarter percent gain the senate passing the chips act 64-33. it now moves to the house where it's expected to pass, and will then be sent to president biden's desk to sign before the summer recess. here's a look at some of the semiconductor names. amd, nvidia, some of the strongest performers, but, again, kind of modest here a lot of expectations that this would happen intel probably the poster child for the chips act, adding about

2% in the session today. still ahead, the fed action impact on housing, we're definitely seeing the fallout. the ceo of one of the nation's largest home builders join us live that's next. this thing, it's making me get an ice bath again. what do you mean? these straps are mind-blowing! they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery.

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welcome back, everybody. pending home sales in june were down 20%, compared with last year, coinciding with the jump in mortgage rates. the home builders are feeling the impact of this rapidly cooling housing market over the past week we've seen results from dr horton, pulte, and all three have -- diana olick is here with a first on cnbc interview new orders were down 25% as the housing corrections now really taking hold. joining us is ceo cheryl palmer. thanks for being here.

we're obviously at a correction point. lets than an hour from the fed announcement, in your view is the fed making the right move, given the impact on your business >> i think the fed mandate, diana, has been quite clear. certainly with economic housing broadband such a driver, housing is going to feel this. ed think the fed is acting swiftly. i think we all expect to see an additional 75 basis points today. i think the sooner we move through this, honestly, the better we are. >> your cancellation rate jumped nearly doubled, so it means you're sitting on a lot of supply how will you deal with that going forward in will prices come down? >> diana, i think to start with, when you look at the cancellation rate, i think looking at the year-over-year

numb, increase is probably the wrong baseline even at the cancellation rate that we reported today, this is still so much lower than historic averages, for as long as i've been in this industry. honestly when i look at our 10.8% cancellation rate, i feel really good, especially when it's like 3% of our starting backlog. we have taken a proactive stance with our backlog you know, being in touch with all of them, helping them understand the financing options out there, and going ahead and getting them locked, in fact, i would tell you that we have a higher percentage of our back half already locked -- as far as incentives on the sales floor, diana, we have focused -- i spent a lot of time this morning on the earnings call talking about this, but we have focused our incentives on working with

our customers to get the benefit of good financing. we haven't made really any pricing adjustments, but instead we're working with our customers tailoring to their needs, generally the impact that they're trying to overcome is on monthly mortgage payments and cash to close. by using our incentives to tailor to their individual needs, we're able to address both of those items. >> let's talk for a minute about your stock it's obviously rebounded nicely in the last month, but you're still down 20% year to date. what are you telling investors now going forward? >> you know, when you look at the way the industry has been valued since the beginning of the year, clearly there's some uncertainty, no different from what we're seeing with the consumer on what all these inflationary pressures mean. if you look at the historic playbook, when interest rates move up, generally sells the

supply so i think that's what's getting priced into the builder stocks i think as soon as we can get some confidence and some certainly, not the level of volatility we have seen, i think that will serve us well. you know better than i do, there's not a direct one-to-one correlation with fed funds rates and mortgage rates, but if you've look at what's happened to dates, mortgage rates have moved almost two timeshigher than the fed funds rate. so when i look historically and think generally that's only about 40%, i think most of this is priced in, diana, and we'll start to see some settling i think all projections right now are seeing next we're the rates could start to come down next year as well. >> what's the worst-case scenario you are currently prepared for >> i think we look at, doing

sensitivities all time, we look at volume. i think as the consumer adjusts to today's environment, it's really understanding what the volume implications are. right now inventory is very low. i would say, when i look across all of our markets on the resale market, we're averaging like one month of supply. that's still so low by any historic standards you know, if we see that continue to move up, i think that would, you know, we would have to reevaluate and look at pricing in our strategies. same on the new home market. there's no completed inventory across our markets we reported this morning, you know, 60 completed inventory homes on 320 communities that's pretty consistent across the peer group i think we just all the have to keep a close eye on inventory and new communities coming to

market sheryl, what about lumber prices down 50% so far this year. is that helping? >> yeah, absolutely. it's nice to see some relief on the lumber side. you know, when we look at the second quarter, we actually had some pretty nice support, which really did help our record-breaking margin that we announced this morning when we moved into q3 and q4, it's a bit of a headwind as we move into next year, it should provide some additional tailwinds. as you know, we saw lumber move to the 1700 ranges last year now it's trading probably in the high 5s, so when we look at new starts coming in the ground, absolutely that's considered in our pricing as we look into next year's deliveries. >> sheryl, thank you for joining us, ceo of taylor morrison

back to you, kelly. >> and our thanks as well. melt meta could post it's f retch, and shares of stanley black & decker, we'll have the action, the story and the trade on all three right after this. ♪ ♪ how's he still playin'? aspercreme arthritis. full prescription-strength. reduces inflammation. don't touch my piano. kick pain in the aspercreme.

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we're looking back, everybody, at the midpoint of the busiest week for earnings this year. three big names are set to report in this earnings exchange of course we start with meta they're set to report after the bell this afternoon. will they get snapped or can they fend off the bears? julia, meta, sum it up for us.

>> well, kelly, this could be the very first quarter that meta ever reports a decline in revenue. this is a company that's historically grown revenue, and it's expected to decline by 0.4% in a 28% decline in earnings per share. analysts are looking very closely for any insight into advertising market both how meta is managing these macro issues and how they're handling the operating to target and measure at impact. the other key thing is competition with tiktok. we've heard it mentioned with a number of other social platforms, and then, of course, meta, the metaverse, we need to know what is going on or when we

might get a sign of when they could start generating revenue. >> chris, what is your take? >> you know, i think that meta will be more like going the, and hopefully in the sense of the expectations that are just so low, that meta will be making it look good. so they have a lot of ways to win. i'm not a huge fan of the stock, not all internet advertising models are the same. so long term, i'm still suspicious, but i think the setup looks pretty good. >> just because to turn the phrase, last week we thought at&t was doing verizon a favor, and then -- i do wonder, just because it was bad and the bar

is low, is it low fluff? >> i would say weeks and weeks of bad news killing these guys, and the stock was pretty near its lows you couldn't ask for a better setup. whether they can live up to low expectations, we'll see. julia, i just want to throw it out there. i use whatsapp more than imessage, believe it or not. >> whatsapp is incredibly popular, it's out of the categories to make it another growth driver. we talked about messenger which people tend to use more in the u.s., and the idea of building them out for tools for businesses to interact with consumers.

>> very forward-thinking, the good old-fashioned keyboard cranking out messages. we'll turn to ford now they're up about 2%, the street is looking for any numbers on the production ramp. the automaker even restructured its business to focus on evs. >> what do you do with ford here >> again, a la facebook, the expectations, especially again, now that gm has reported, expectations are really low for ford if you want to own ford long term, i wouldn't be afraid of

stepping in front of it. having said that it's really to tough. and finally, got to mention stanley black & decker whose shares are down. they're hiking -- and focus our demand for housing and home repairs, especially after weber, also any comments on supply change issues, inflation and pricing. chris, why are you watching this one in particular?

and so this company has been around for 100 years it's going to have softers earnings i would say on any weakness, a mediocre report, i would be a buyer, we don't own it right now. the long-term value proposition with terrific brands, so i'm kind of a fan of this once. >> still significant around the builders, too. one of my favorite things to talk about they're radioactive right now. sometimes they sectors can give you some bargains. >> yeah. well, sometimes, like you want, it's for the longer run. chris, we'll leave it there.

great to see you again chris. up next, these rate hikes aren't often cheered by investors in emerging markets. it's down since the last fed hike, but the impact of recent and future hikes could be more muted than in the past we'll reveal why, next

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comcast business. powering possibilities. welcome back the fed is poised to hike rates by another three-quarters of a point in just about ten minutes' time, while it isn't good news for the emerging market investors, things could be different this time around. seema mody has a look at what's changed. that typically means bad news for emerging markets and what's worth noting is some countries have learned from the past case inpoint, indonesia and south africa hit hard in 2013 by the tantrum because of the size of their current account deficits a look at the fragile five economies that are sitting on that include brazil, turkey, india. that debt is smaller than it was eight years ago.

at this point sending it into a crisis remains low and it will remain as a headwind the cost of service foreign debt does go up and it does cut the growth forecast for 3.4% for this year from 4.6% previously according to capital economics, most vulnerable include argentina, turkey. and the positions improve in the last couple of months. you had president xi jinping.

ails some of the u.s. companies like those that have that exposure to the chinese market that would give us a read on what's really happening on the ground. >> look at adidas happening yesterday and it was chinese demand that was one of the reasons why they had to warn and whether that's unique to them or not, time will tell. seema, thanks. >> that does it for "the exchange," everybody q■m decision "power lunch" picks up our coverage after this quick break,

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(sister) yeah, get unlimited data for as low as $25 a month. no family needed. (vo) family plan savings without the family. get visible. single-line wireless with unlimited data for as low as $25 a month. good afternoon, everybody. welcome to a very special edition of "power lunch. i'm tyler matheson along with kelly evans. the fed decision on interest rates just minute away the central bank widely expected to hike interest rates by .75 of

a percentage point or 75 basis points in an effort to tame inflation. >> ahead of that decision, let's check at where the markets stand right now and the dow is up, i'm sorry, 106 points and consistent with the gains we've been seeing throughout the morning the s&p 500 is up 1.4% and the nasdaq has been leading the way all day long after those better than feared big tech results ñ■st night the nasdaq up 2.5%. >> a look at the s&p 500 just about 30 points away from 4,000. we do so as wei welcome our guest, david kelley, chief global strategist at j.p. morgan asset management and senior investment strategist at edward jones and global fixed income portfolio management at morgan stanley investment management. okay, folks. we're going into this and everyone has a low surprise factor here. everyone sort of expects three-quarters of a point. let me turn first to david, and i remember at the last one of these events that the risk of

the fed is in these circumstances moving too late, doing too much and doing it for too long is that still the prime risk the fed faces? >> yes i mean, walking a tightrope on the edge of a recession. i don't think gdp tomorrow would be negative, but i think over of the course of this year there would be no growth at all and the problem w■th the fed is reacting to data coming in monetary policy should be forward looking and it is slowing and the federal reserve should ease off for this year, but i think they will go 75 basis points today because they just don't want to move and they actually see signs of lower inflation. >> mona, is the fed willing to take a recession mild, something more than that in order to quash inflation. >> yeah. clearly front and center right now is this inflation mandate. until we start to see that data come down, probably two, three, maybe even more inflation readings to the down side and

they can't say that a trend has been established and to david's point, keep in mind the data that is in the gdp report and the earnings are backward looking and the fed had tightened into restrictive or neutral territory and we hadn't started quantitative tightening and if we're softening in anticipation of this fed and we could tighten and we could see more downside ahead in terms of economic softness and growth perhaps the silver lining is the market has started to anticipate ahead. >> jim, we have less than one minute to go, you're the only one in this trio who sees even the remotest possibility of a full point hike from the fed what percentage do you put on that possibility >> well, i say it's about 25%. our best case is that it goes 75 basis points i wouldn't rule anything out the fed has to be tough on inflation. so far they haven't seen core cpi and core inflation now of down over a month over month inflation and the problem is that they're fighting a lagging

indicator with a policy tool raising interest rates that works with the lag so it's very, very difficult for them to time this and get this right. the risk is a recession. the risk is a hard landing they are willing to go into that territory in order to stop inflation, and i think that's what the markets have to take away take the fed very seriously about fighting inflation >> folks, we will pause right there and go to steve liesman now with the fed decision. steve? >> the federal reserve hiking interest rates by three-quarters of a percentage point bringing it to 2.25 to 2.5% ongoing increases in the target range will be appropriate in the month ahead. the committee is on track as well to reducing its balance sheet. they reduced the rate right now e increasing that by -- to 95 in the month of september the fed downgraded the assessment of the economy saying he