>> chris murphy, must read, must watch, must listen chris, thank you really appreciate it gamma squeeze. good fantasy football team name. that's all for "the exchange." the markets are a little in the green. the volatility index down a little bit "power lunch" starts right now tyler and courtney, everybody. welcome to "power lunch. i'm tyler mathisen courtney reagan to my left here's what's ahead. tech stocks attempt to come back after yesterday's rout from mega cap to chips to the cloud, the stocks to buy on the pullback are the ones to be wary of and those that have more to fall and what's the difference between low volatility and momentum etfs? maybe not that much. you might be surprised by those funds' top holdings especially if you're looking to offset some of these big market swingds. and stocks are off their highs modest gains right now today's gains slowly, slowly

evaporating. the dow up 172 at the high and right now as brian sort of foretold a few minutes ago, i heard him say tentatively that he wouldn't be surprised to see the dow in the red before the close today. and there you see it, down 69thu a fifth of a percent s&p flat, nasdaq up about a quarter of a percent "wall street journal" reported netflix expects its ad-supported service to reach 40 million viewers globally by the third quarter of next year and shares of verizon are lower midday after an executive said the company sees declines in third quarter wireless subscribers. the comments were made at a goldman sachs conference >> so can the areas of the market with concentrated ownership make a comeback after yesterday's sell-off we're breaking down the tech sector from mega caps to semis to cloud stocks to see if the laggards will ever regain their

leadership position. so let's begin with big cap tech the invesco qqq etf erasing some of its losses in today's session after falling 5 1/2% just yesterday. its worst trading day since march of 2020. let's bring in tom fortee, senior research analyst at d.a. davidson if it's such a big pullback on a day like that i imagine if you have a strong stomach today is the day to buy tom, is that what you're suggesting that we do or do you think that's just the beginning of more down days to come in our near future? >> first off i do think that an elongated period of elevated inflation with the fed continuing to raise rates to combat inflation is a very challenging background for technology stocks. you think about how historically they have higher multiples, higher valuations than other stocks within the indices, and rising rates is a challenge. i do think there are some opportunities with apple and amazon and i'm happy to discuss those if you're interested

>> yeah. before we get into sort of the particulars of the individual names i have more of a bigger question i understand the theory of higher interest rates pulling down the growth names. of course the big cap tech stocks are the first ones you think of but even if you have a period of elevated inflation are you really going to see an enterprise client, a big business pull back on its spending on the amazon cloud or microsoft enterprise software? don't you need that to run your business how much really is profitability potentially hurt for these companies or do we have to go one by one to talk about it? >> so the good news is if you looked at our white paper, dude where's my dollar, we talked about inflation. think about roku as cord cutting, as providing consumers an opportunity to save money in an inflationary environment. and as you just pointed out, amazon with its cloud computing effort enables enterprises to save money on their infrastructure investments we saw amazon work with companies to scale back their spend during the height of the

pandemic so i do think as it pertains to cloud computing, as it pertains to amazon, that high margin revenue might be more durable which makes amazon shares attractive today >> are they more attractive now that amazon lost $98 billion in market cap in one day? >> the answer's absolutely yes so to the extent that buying on dips, things of that nature, i know that sometimes it's counterintuitive and sometimes it's emotionally difficult but you want to take advantage of market sales to their initiated position or buy more and the answer is yes. >> courtney may understand exactly why inflation and rising interest rates affects this category of stocks more than it does, say, energy stocks or utilities or used to be utilities, rising rates were anathema to utilities. but can you explain in a few phrases why it is these titans of tech that get whacked when you have surprises on inflation and rising interest rates? what is it natively about them

that makes them more vulnerable than, say, a procter & gamble or name it? >> i can tell you in 2022, and the story's been the same for a couple years now, where's the inflation coming from? it's coming from supply chain. what does apple do sells a lot of products that they import that are assembled in china so this inflation makes it more expensive for apple to sell products that's why inflation's a bad thing for apple. similar for amazon and their e-commerce business. to the extent a lot of the products that are sold on their e-commerce platform are coming from china the inflation and supply chain is a problem so i think that a lot of the tech inflation right now is supply chain related we've seen some signs of improvement but it's still an issue. >> all right tom forte of d.a. davidson, thank you very much. appreciate the explanation thank you for helping me the smh semiconductor etf rising today after falling more than 5%

yesterday. and there are signs that the weakness in consumer-levered chip stocks may be spreading to other parts of the sector. our next guest has been cautious on the group, downgrading some names earlier this month it wouldn't be a good day unless we had stacy razgon on, managing director at bernstein. thank you, stacy, for coming back and joining us. yesterday you said investors in semis are growing increasingly worried about a macro correction that basically means a recession coming that will chill demand. is that the big threat to these big stocks >> i mean, it is a threat. it's a big one, yeah i would say investors have been increasingly worried we've seen this whole year the sector has birdiely underperformed it peaked almost at the very beginning like january 1st of the year and it's been underperforming all year even as earnings estimates until very recently were still climbing because investors were getting more and more concerned about the achievability of those estimates. we've now actually started to see some of the estimates start to roll over, particularly as

you mentioned in some of these more consumer focused areas, pcs, smartphones, graphic cards, gpus, tvs, that kind of thing, and investors are worried that as the macro gets worse and there's still covid lockdowns and now we have issues in china and the ukraine war and everything else that these sort of things will start to spread into other areas >> you know -- >> you're starting to see some incremental -- yeah, go ahead. >> forgive me. finish your thought, please, stacy, i begger pardon >> we're starting to see incremental signs, data center for example. enterprise spending within data center -- intel's data center business missed pretty terribly on enterprise. amd, nvidia kind of mentioned it mostly the companies are talking about supply chain issues at this point the server customers can't get all the parts they need. they're having trouble building the servers. but it's sort of onestart. auto and industrial are holding in reasonably well although companies like analog devices have started to change tone a little bit, talking about order cancellations. personally i've been worried more about stockpiling and

double ordering and those kinds of markets because lead times have been so long because it's been so hard, part shortages have been so much that customers in those scenarios tend to order more than they need. i personally think there's a lot of evidence in markets like auto and industrial that have been very strong that some of the demand we've seen is maybe not all actually going to the end products it may be stockpiling i'm nervous about that that tends to bite you on the other side -- >> i think why this segment is so important is that so many investors who are watching today probably either are in or have been in or have thought about getting into some of the very stocks that we're talking about here the amds the nvidia a market darling if ever there was one a couple of years ago. qualcomm, amat intel has been sort of dead money for a long time. we know the story there. what advice do you have for investors with respect to these stocks what do i do if i own them i've ridden them up.

i've ridden them down. what do i do >> you bet so if you're in semis and you want to be in semis and you're cyclically nervous, i actually like broadcom. broadcom doesn't have a lot of consumer exposure. the only consumer exposure they have is apple. apple's actually holding up okay most of what they have is infrastructure on the semi side, which is good. they have not been shipping everything their customers have been order they've been deliberately undershipping because they're aware what customer behavior tends to be like around these sorts of cycles. the backlog is $31 million more thain ayear worth of semi revenues got a lot of runway there. enterprise focused software that is much more stable and high margin they're trying to buy vmware right now which will bring the software semi mix to 50% >> broadcom's ticker is what, avgo >> that's right. it used to be ahavingo highest margins, it's one of the cheapest things in the space there are some of these more secular stories that are exposed to -- but they've been punished maybe a little too much. in my coverage i throw in companies like amd and qualcomm

into that category av is exposed to some of these markets, but they've been powering through like a champ because their product executes have been phenomenal and they're taking tons of share qualcomm, anything touching a smartphone has been death, they make chips for that. but their mix within smartphones is much better, much more high end, it's preserving them and i think the setup for qualcomm next year looks really, really good they get more samsung volume smartphone comparison will look really easy next year. and people worried that apple's going to go away it won't go away and ten times earnings >> wonderful insights, encyclopedic knowledge we'll see you every day next week have a good weekend. >> let me know >> you got it. >> and finally let's take a look at the cloud stocks the global cloud computing etf recovering today but down today following yesterday's steep sell-off cloud names thought to hit their bottom earlier in year but fears of a more hawkish fed could have the stocks reversing course.

still my next guest says he's confident cloud stocks will prove resilient despite macro headwinds. into joining us is jolt fish booin, managing director of software and cloud technology. as we did with our previous two guests i'd love to get your big picture theory on why you think cloud stocks can hold up in this environment after a day like we saw yesterday which really probably sparked fear in a lot of folks holding on to tech names specifically cloud >> great question. number one, we think they're recession resistant. not that they're immune. but they don't have any consumer exposure as your last guest talked about also the secular tradewinds in digital transformation all companies are leveraging technology to eliminate -- increase productivity and eliminate mundane areas of their businesses we think people are doubling down in some instances on cloud technology to improve their businesses in a recessionary environment. >> okay. so that sort of goes to my

question sort of with our initial guest about sort of wondering why these high interest rate environments are frightening to some investors in the tech space because really there are certain things that are not optional if you're in business if you want to run at maximum efficiency and that's part of your theory for some of these cloud stocks, that in order to operate at a lowest possible cost you need to employ this technology. is that right? >> yes and i think the bigger issue we've seen, this is more of a valuation reset. valuations got a little extreme because there are a lot of investors chasing far few too nasdaq that are really platform or transitional ideas. there's many companies or transformational ideas there's many companies that say they are but there's very few that are really platform companies that are really in a pole position coming out of this to be very recession resistant so i think we're seeing a valuation reset to some extent we think it was overdone to the down side but we think they'll outperform significantly when we come out of this recessionary environment and interest rate

environment. we all know that at some point this will reverse. we don't have a crystal ball when it will happen but when it does some of these companies are going to significantly outperform and that's where investors are going to want to be positioned. >> okay, great let's try to drill down on some of those names, give our investors here some idea that watching we don't have time to go through the whole list but some of the cloud stocks that you think you see the most opportunity that to your point might have sold off more than they should have yesterday or in previous days. >> just a couple of ideas. on the infrastructure side clearly snowflake has been a name where they're going to be a $10 billion revenue company with substantial margins going forward. another company we like is getlab, gtlb, which was an ipo late last year they're in the dev ops space that's application development space. they've got a platform there that is just extremely beneficial to a lot of companies, we're in the early stages on the security side the two names i would really highlight

there are crowdstrike, crwd, and z scalers, zs. those are the two names that are repositioning for the cloud from a security perspective and we think they're the ones that are best positioned going forward. >> you know, there was a great movie "the graduate," joel, where the protagonist was told to go into plastics, that's where you want to go, you want to go into plastics. if i had that advice updated to today i would say go into the cloud and computer security. that's where the future's going to be made joel fish booin, thanks. >> thank you >> that's an obscure reference you remember that movie? >> i do. mrs. robinson. i'm with you >> love that >> i know it >> coming up focus on the profits, folks that's the strategy being used by a veteran market watcher when it comes to investing in this environment and he's identified a few key stocks in key sectors he thinks are going to do well plus rising rates. taking a risk, a toll on mortgage demand i should say but there are a few

housing-related retailers that could benefit from a softer real estate market. and before we go to a break a look at nucor which is on pace for its worst day since 2020 following a profit warning dragging other steel names lower as well. "power lunch" back in two. dow down 7637 -- 76 ♪ ♪ ♪ ♪ ♪ ♪

all right. we have a news alert on amazon the stock is moving lower, as you see there, by about -- it's

moving higher right now by about a half percent but it did dip a little lower on news that california has announced legal action against the company, suing the company over antitrust claims the state attorney general alleges the company's contracts with third-party sellers and wholesalers inflate prices, stifle competition it is the biggest legal action to date in the u.s. for amazon meantime, stocks losing most of their early morning gains heading back toward session lows now down 73 points on the dow. following yesterday's dramatic more than 1,000-point slide. two veteran market players say the best way to navigate this market is to focus on profit potential and cash flow. joining us now david trainor, new constructs ceo, and david leibovitz, a global market strategist at jpmorgan asset management mr. leibovitz, we've got two davids, so i may stumble but we'll do our best. mr. leibovitz, i'm going to ask

you to start first profits are one of the drivers of stock prices. the other driver is how much people are willing to pay per dollar of profit right? that's the multiple there. how do you separate the profitmaking companies that are priced well from the profit-making companies that aren't >> so i think when we think about the profit story going forward we see two separate types of companies that we think will be able to deliver quality and consistent profitability against the macro backdrop that we see playing out on the one hand we want to own companies that we believe have pricing power. in an environment where input costs are rising, whether those be commodity prices or other inputs, we want to own companies that will be able to pass along those higher prices to the end consumer and so that would be deemed to be a high-quality profit stream that we'd be willing to pay for

as we look into the end of 2022 and the beginning of 2023. on the other hand, we do think that there's an element to this where looking at the ability of companies to generate profits over time gives us a sense their ability to generate streams of profits going forward. a lot of those all weather growthier names, some of the technology names that have old off quite aggressively so far year to date, are looking interesting to us as well. as you put it, tyler, it's really about owning growth at a reasonable price and we either want to understand and recognize that these companies have pricing power or historically have been able to deliver key profit streams almost irrespective of the macro environment. >> before we turn to david 2.0 i want to follow up with you, mr. lebovits you say you want companies that have profitmaking ability but also pricing power where are those companies clustered? or name me some as examples that are not necessarily stock recommendations by you but where are they clustered

or give me some names, give me some idea of who has pricing power and profit >> absolutely. one of the metrics we always look at to kind of gauge pricing power is operating leverage. we basically want to understand what the impact on a company's bottom line will be from a given acceleration in revenues, and the more pass-through you have there, again, the more pricing power we would deem that company to have. so if you look at operating leverage by sector, this leads you to the energy space, the material space, the financial space, but i think it's a little bit too early there to be diving in and consumer staples as well a lot of the pricing power we see is on the value side of the style box and then we do see opportunity on the growth side as well given valuations >> got you >> david trainor, as you're looking at evaluating stocks you say we need to understand fundamentals of course but technicals too but then you make the point that charts don't always work in this environment. so how are you evaluating technicals, then, since we got a

little bit of the fundamental picture from mr. lebovits? >> i think the technicals are telling us the easy money days are over and fundamentals are going to be more important look, at the end of the day being able to understand the truth about profits is fundamental to being a successful investor in the long term the technical tape has been uppingly for several months, for even over a year or so right? it's not been the straight up market that we've learned to enjoy over the last ten years, which i think means investors, if they want to trust what they're investing in need to really understand things like pricing power in the past, which is hey, are margins positive have they ever been positive and for a lot of companies the answer's no. and it's not always as easy to understand margins as people think because companies have a way of cooking the books legally by bearing important information and footnotes in the details that most investors never take the time to read >> so david trainor, i know you did some due diligence for us. give us some of your stock ideas, some long stock ideas

i know you have a list of zombie stocks but i want you to talk about the ones that you do see opportunity. >> yeah. we like shell. we think that's an extremely profitable business, souper high margins, great cash flows. and yet the valuation implies its profits will permanently decline by 30% or 40%. aca and ford we have on the screen there, similar situations we think the firmds have a great deal of pricing power. ford's a different animal in that it's actually -- it's really been nimble in terms of its ability to respond to the change in the tastes of consumers. and i think they've got a great track record there, great cash flow super cheap. hca is just a great example of a super defensive business that's way more profitable than people give it credit for great margins. and all three of these stocks, they traded valuations and imply permanent profit decline so to tyler's question earlier about how do you figure out the good stocks from the bad stocks if they're all profitable, well, you'd want to buy the stocks, the profitable companies whose valuations imply lower future cash flows than you think are

actually going to happen right? so buy low expectations, sell high expectations. >> all right to a pair of davids, trainor and lebovitz we thank you for the insights. court? >> stocks trying to rebound today after yesterday's big sell-off enjeh the best-performing sector as oil bounces big gains for cortera and apa. tesla and the cruise lines boosting consumer discretionary. much more on the markets, which are down the dow down about 54 inpots more "power lunch" coming right back

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invest with confidence. let's get to bertha coombs for a cnbc news update hi, bertha >> hey, courtney here's what's happening at this hour in baltimore prosecutors are looking to vacate the conviction of adnan syed for the murder of hei ming lee the case drew international attention on the podcast "serial. state attorneys say they uncovered new evidence including some on two other suspects which was not shared with defense lawyers. candidates who deny president biden won the 2020 election, a number of them will be on the ballots in 27 states this november according to a study obtained by nbc news

total of 43 candidates for governor, attorney general, or secretary of state support former president trump's false claims that the election was stolen from him. and a stroke of luck in philadelphia no one was injured, but a building containing a pizza shop collapsed in a cloud of dust the pizza joint was supposed to open just a couple hours after the building fell. key pizza in fish town, a very popular spot back to you guys >> all right thanks very much, bertha coombs. stocks trying to get positive. trying, trying, trying following the worst day since 2020 ahead, we will get a check on the markets on oil and interest rates. check out how quickly the 30-year mortgage rate has risen from the 3s to start the year to now over 6.3%. look at that that's a huge damper on the mortgage demand. and we take a look at home construction etfs. down -- that one down 15% in

just the past month. but what about all the stuff that goes inside the home? and the retailers who sell it. we will check on those stock next on "power lunch." i've always loved building things. not just structures and skyscrapers, but teams who make it all possible. after all... we wouldn't be where we are today without them. so we made sure that like these buildings... their futures may also stand the test of time. ♪ ♪

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we've got about 90 minutes left in the trading day and we want to get you caught up on all the market stocks, bonds, and commodities. what a week it has been already. we're only halfway through we also want to take a look at the health of the housing trade. let's begin, however, with the markets. looking at the dow, the s&p and the nasdaq, you can see that the industrials are off a little bit by about 32 points, about .1%. but the s&p essentially flat nasdaq is higher by a third of a percent. best-performing dow stocks right now are johnson & johnson, chevron and merck. salesforce also up as well the dow laggards are some industrial names like honeywell, 3m and dow verizon also off about 4/5 of a percent. airlines lifting the dow transports delta, alaska and american rails weighing on the index as a strike deadline looms. union pacific falling 3% norfolk southern down about 2% now we go to the bond market and

that one has taken a breather following yesterday's big moves. rick santelli as always tracking the action rick >> yes it's like the treasury market's in a hammock today, tyler, compared to yesterday. look at an intraday of two years. yes around 8:30 eastern we had some volatility but when you hook in yesterday and look at what happened at 8:30 eastern a far cry from the rocket ship that yields had on that two-year -- and granted short maturities rocketed higher but all maturities were significantly higher right now you have a two-year only up two basis points and you have the rest of the curve getting close to the unchanged line like 10-year, 20-year and 30-year bonds are actually lower in yield and higher in price now, when i look at the pmt pi data which i brought out at 8:30, it's not really cool in any way. as a matter of fact, what really jumps out at me is the august read on pmt pi, x food and energy, known as the core up .4 was higher than expectations, higher in the rearview mirror.

there was nothing cold about this report but after yesterday's cpi and consumer price inflation always hits home, today really fell flat and if we look at the 10-year, and i'll show this chart every day because the fact of the matter is 7s and 10s have yet to close above their mid-june high yield. and that's important when everybody's looking at a terminal rate on the fed and how short maturities are getting closer to what may be a 4% terminal rate look at the 10-year. it's bucking that trend. and finally, the dollar index. yes, this two-day chart shows it's slipping a bit. but after yesterday's rocket ship our currency always a place to hang out when things get a little wacky is holding up quite well courtney, tyler, back to you >> rick, thank you very much oil closing for the day as it continues to climb back toward $90 a barrel pippa stevens has the numbers. hey, pippa >> hey, tyler. oil is getting a boost as supply concerns come back into focus. now, we did get the latest read on the market from the international energy agency today. they said demand growth is

slowing and expected to grind to a halt in the fourth quarter however, for the year the paris-based agency still sees oil demand growing by 2 million barrels per day and looking forward the iea said that any slowdown from europe will be partially offset by gas to oil switching as natural gas prices surge. with that let's check on prices. wti. natural gas is the big mover here, surging more than 10% and breaking above 9 bucks per mmbtu. that is boosting energy stocks the group is up about 2% by far the largest s&p gainer. upstream players apa, devon and eog are leading those gains. also quickly wanted to point out lithium stocks, which are also on the move, albemarle hitting another record today it was one of the few stocks, tyler, that registered a gain in yesterday's session. back to you. >> thank you very much now we go to the housing market where higher yields are taking

their toll on mortgage demand as rates skyrocket. nothing short of that. diana olick with that story. hi, di >> hi, tyler last week was the first time the weekly average on the 30-year fixed went over 6% since november of 2008 6.01% last week to be exact according to mortgage bankers association. the increase hit refinance demand which was already battered it fell another 4% for the week and was 83% lower than the same week a year ago. with rates above 6% only about 452,000 borrowers can now actually benefit from a refinance. that according to black knight that is the lowest number on record mortgage applications to buy a home essentially flat week to week but they were 29% lower than the same week a year ago. and i'm hearing from real estate agents that more supply is coming on the market but they're starting to do deals now with full contingencies like home inspections. haven't done those in a few years. rates shot significantly higher yesterday after we got that hot cpi number and then a little bit higher today to 6.3%, that according to

mortgage news daily. the question now is will they stay in thisrange for the fall housing season or drop back a bit as they did last month ty >> thanks very much, diana court? >> well, rising rates are hurting more than just mortgage demand of course the home improvement boom has gotten, quote, hammered too after hitting all-time highs during the height of the pandemic check out names like lowe's, home depot and floor & decor, all down 25% or more wayfair down more than 70% our next guest saw this coming she downgraded most of these names back in january and warned of the back half slowdown we're watching play out right now. so for more let's welcome in laura shampine she is the director of research at loop capital. laura, gts great to see you. when i talk to home depot and lowe's often of course the ceos and cfos are pretty positive, looking at the glass half full and home depot says they don't worry until they start to see mortgage rates at 7% of course if we're at 6.3 we're

not far from that especially if we're looking at another rate increase but also they talk about this backlog from the pros and there are still so many more projects they have to get through why do you think that things are just only going further south from here for some of these names like a home depot, like lowe's >> sure. so home depot and lowe's are obviously great companies but i covered these companies back in 2006 when they were saying similar things to what they're saying now, which is that the age of housing stock is older and older, that people will stay in place and complete projects it just doesn't seem reasonable to me. the numbers have not turned south yet. really the past couple of quarters they have seen pros working off that backlog what worries me is the pipeline that we may not be building for next year as consumers don't have stimulus checks in their accounts anymore, as inflation is hurting them. you've got to feel pretty comfortable to make knows big ticket expenditures on projects and we're just afraid we won't

see as strong of a project cadence when we get into next year >> fair enough obviously, during the pandemic when all of us were sort of hunkered down at home we looked around we realized we needed to make some updates, whether it was new flooring or a new couch from wayfair perhaps but obviously wayfair's stock we mentioned in the opening is down quite a bunch. it's often quite vol voluble i believe you have a sell rating >> they have a lot of debt they just raised more convertible debt this week they're burning a lot of cash. so if we look at the two markets that they buy from, digital advertising where we've seep inflation and it's tougher and tougher to acquire customers with some of the new ios rules that means the great data they used to have is getting older and older and older and the same time couches, the replacement cycle is five to seven years in good economies

in bad economies it's ten years or more. similar for mattresses just not a great place to be right now. >> i didn't know that, the couch replacement cycle is five to seven years. i just learned something >> ten years >> thank you for that. now, point to two stocks you don't typically think of as either home improvement, home repair stocks. i guess they are costco and b.j.'s. how do they -- is he fact that you like them a reflection on the idea that you don't like so many others and that's all that sort of -- they're the best, the cleanest shirts in a dirty laundry or what? >> yeah, that's accurate, tyler. we just don't have much to like. we're looking for inflation beneficiaries and costco, b.j.'s, you know, you drive by that gas station, they give you a massive savings versus other gas stations you know you need the savings. b.j.'s, for example, gives you 25% off on groceries

pretty good deal these days. costco the values can be even deeper as long as you've got the pantry that's big enough to manage those pack sizes. just only a few places to hide in anything close to hard lines and costco's one of the few, you know, great performers that -- the other key for costco and bj's is they make 80% of their income from membership fees. so membership fees are pretty steady eddy. even if their retail margins shrink, shrinking from 3% to 2 1/2% is just not as tragic their income will stay healthy good times and bad times as long as they can keep those members in the store, inflationary environments are actually good for them >> just paid my membership to costco a couple weeks go and i thought boy, what an annuity that is. it's just amazing. >> oh, it is >> laura, thanks so much great to have you with us. >> thanks for having me. thanks, tyler. thanks, courtney >> it's not a controversial statement to say americans are divided politically. but one thing many americans are

united against, stock trading by members of congress with access to information today nancy pelosi reacting to a new investigation showing how prevalent it is. we'll have more ahead on "power ncluh.

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welcome back to "power lunch. house speaker nancy pelosi giving an update on an issue that unites both republicans and democrats, and that is congressional stock trading. >> we've been going back and forth and they were refining things and talking to members about what they think will work. and we believe we have a product that we can bring to the floor this month >> very interesting. her comments follow a "new york times" investigation that showed nearly a fifth of congressional members reported trades with possible conflicts of interest let's bring one of the authors of the investigation, kate kelly, "new york times" reporter and a cnbc contributor kate, nice as always to see you. when you say there were possible conflicts of interest, the nexus there is that they traded stocks in industries where the members

served on committees where those industries' interests might reasonably or did actually come into debate. am i right >> that's right. that was our framing, tyler. because some would argue that members of congress are constantly privy to privileged information, non-public information that could potentially move a stock we wanted to frame it a little more narrowly in which we looked at people's committee assignments as you said and then we said to ourselves okay, of the stocks they or their immediate family members are reporting buying, selling, and this could include bonds and commodities and other things too, would a reasonable person seem to think that these stocks or the sectors they're in could be affected by that committee work so example, if you're on the armed services committee and you're trading raytheon, lockheed martin or northrop grumman, a reasonable person could assume that you might be in the information flow of government behavior or even updates from the company and things like this based on your committee assignment

>> kate, it is very interesting. you said 97 members of congress out of 535 people are trading in a way that could be regarded as conflicted but you also make the point in the article that they are still not allowed to do anything that would be legally considered insider trading. they cannot trade on material information they have that the public does not. is that true >> that's totally true, courtney and i'm glad you pointed that out. it's interesting because members of congress are not allowed to trade on non-public information any more than you and i are, which we're not. in the stock act in 2012 that was codified i think part of the reason the clarification was needed is that under the constitution congress does enjoy some legal protections that regular folks do not it's called the speech and debate clause. and things they're doing in line with their government work are potentially shielded from litigation but having said that, yeah, there are plenty of situations here that at the very least might give one pause or make one

think there could be potential conflicts. and that's the kind of thing that the members at least who are pushing for reforms of this are exercised about. they don't like the optics of it, and they feel that it erodes trust in congress. >> yeah. and one thing we should point out here, as we look at senator tuberville of alabama i believe, is the idea that this is not just stock trades, these could be trades in commodities or futures orother markets as well that's one thing did you as you did this research, kate, did you find that any members who were trading, making these kinds of trades who have been way out front in decrying the practice i know that elizabeth warren of massachusetts has been very outspoken about this she doesn't trade stocks, does she? or does she? >> no. no i mean, most of the folks who have been outspoken about this practice and have said it needs to be banned or restricted do not trade themselves now, there are some exceptions

to that. dean phillips of minnesota has been a co-signer on one of these bills, i think it's spanberger's bill, and he did trade somewhat ac actively you'll see him if you look at our table because he was trading some stocks, you know, a year or two ago, probably two or three years ago now that i think about it, that might have dovetailed with his committee work. but he has since gone through a process of entering into a blind trust so that he doesn't know how his assets are being traded and doesn't have input or get output some are going in that direction. josh gottheimer of new jersey, who i think is on your air a fair amount, has traded actively through a broker, an account that i think is jointly held with his spouse -- i'm sorry, when i say traded actively, i mean the broker trades actively on his behalf. and he would explain it as to say there's a wall between my spouse and i and what we know about the portfolio and that broker and what they're doing, it's not a blind trust but i don't get into it day to day but he also is in the process of

going into a blind trust and also has co-sponsored some of this legislation. >> very interesting. >> i think most of those people don't do it or are in the process of putting more kind of protections in place >> very interesting. really fantastic work, kate. it's a lot of work and i commend the article in today's "new york times." kellyu >> thank you, tyler. that's kind of you. >> thank you. well, check out the u.s. envy a low volatility etf slightly lower after falling more than 3% yesterday. that actually performed worse than the biggest momentum fund to explain why you've got to know what's in your etf. the ceo of mcdonald's speaking right now and making healedlines ony t the state of the u.s. ecomin europe. we'll bring you those coming up next on "power lunch."

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welcome back to "power lunch. i'm kate rogers. we just heard from the economic club of chicago in conversation with footlocker ceo mary dillon. they want to include an innovation hub and keeping the company's headquarters in chicago. he also talked about challenges and operations like zero covid in china being a big hurdle and

not as challenging, and what that means for brators he says he believes we're heading into a minor recession in the u.s. but likely a more significant recession in such as a rough. he says the company will continue to focus on value two other topics, menu items, things that have come an began if you want mcplant, buy mcplant alluding to possible sales of the beyond meat patties saying items that don't sell well don't stay lock on the market like salads, et cetera. ab-257, the new law signed by gavin newsom in california to regulate the fast food industry calls it a terrible piece of legislation because it picks winners and losers and does not apply to all restaurants evenly. >> thanks very much. the tortoise or the hare, low volatility or momentum which is better for your portfolio right now? "power lunch" is coming right back we'll help you with some answers.

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(swords clashing) and helping you plan for future generations. -had enough? -no... arthritis. here. aspercreme arthritis. full prescription-strength? reduces inflammation? thank the gods. don't thank them too soon. kick pain in the aspercreme. amid the wreckage of yesterday's selloff, something strange has happened the momentum stock etf ticker mtum outperformed the ishare's minimaliteiev volatility on a day you would expect the opposite to happen a look at the names on the low vol list provide an argument for why many etfs don't life up to their name among the top five holdings t-mobile and sysco far from low vol names. let's welcome in scott nations,

president and cio of nation shares can you explain why it's hard to explain what's in your oatiev and not to buy them blindly and lessons we learned from yesterday. >> as you pointed out. not all low ball etfs are low ball the quintessential ones have utilities in them, the quintessential low ball etf is 28% utilities and that's horrible in a rising rate environment so you do have to pay attention to what's in your etf, and there's a bunch of overlap now between low ball etfs and momentum etfs only because the momentum etfs use a screener looking for names that are doing well versus the broad market, and in a downmarket that tends to be names like staples which are also a staple of low ball etfs. so absolutely right. you really have to pay attention to what is in -- in your etf >> what saveable role do these

funds have in an ordinary person's portfolio why in the world would you get in them? >> let's talk about the low ball etf which makes a lot of sense if they truly are lower volatility and well diversified and not overweight something like staples or utilities. the mobile etfs is a wonderful question momentum is often an illusion. we think it's going to continue, and the math shows it's not going to continue and the momentum etfs end up in the big beta names when the market is flying and in the low beta names when they are not like right now and you don't understand what you're getting with a momentum etf. i would never invest in one or ever use momentum as an investing thesis period. >> okay. take me back to the minimum volatility etf why would i want that one? what would that protect me from or help me do or what? >> well, the goal is obviously lower volatility, and they try

to -- some of them try to do it -- some of them try to do it by -- by diversifying across sectors. >> right. >> and do the degree that they can do that okay, but, again, you end up with a really strange mix that often doesn't work out the way that you want it to. >> all right we'll have to leave it there scott, thanks so much for your time today we've run out of our hour and it was fast. >> it's over. >> thanks for watching "power lunch." >> "closing bell" starts right now. ♪ >> stocks struggling for direction following the worst day for wall street since 2020 the most important hour of trading starts now welcome, everyone, to "closing bell." i'm sara eisen take a look at where we stand in the mark kind of a mixed picture right now. we lost the gains. it's been most of the day up for stocks overall, but we're down about a tenth of 1% on the s&p the dow has turned negative as well, down 100 got at high at 175 nasdaq holding on to its gains, just bearly. the