this will be the same. i think live nation's business model will remain in tact and the stock will work, 77 bucks right now, for me, way too cheap. >> and steven weiss? >> chevron i added to it, actually. at the end of last week. and i think it looks -- the chart looks great here i'm sure you would agree and china's opening will help. >> thanks, everybody see you in the o.t "the exchange" is now. >> thank you, scott! hi, everybody. i'm kelly evans. here's what's ahead this hour. easy come, easy go stocks are giving back yesterday's gains and one of our guests will hardly be surprised by that. he says sell any rally until at least the summer he joins me momentarily to explain why. plus, everyone bracing for tonight's earnings from microsoft, so much in flux layoff and cost cutting, spending billions on ai, stolen cloud and pc growth, then there's that activision deal we'll tell you what to look for and how to position and what the stakes are for the report.

and how sky-high egg prices could be a tailwind for one group of stocks in particular and it's not calmain >> that will be an egg-celent report >> you did that. >> let's talk about the markets. they're giving up some gains yes, they are, but we are well off session lows at this point here it's a mixed market, and that's the best way to characterize it. the dow industrials are just about flat on the session, but specks of green up, still above 4,000 for the s&p 500. it's down six points right now to give you again, context for the trading range on that broader index. we were flat at the highs of the session and down roughly 30 points at the lows tilting towards the negative side of things, but for right now, down about 1/10th of 1% the nasdaq composite down about one quarter of 1%. we'll have more on that in just a second

if you look thematically, technology is in focus for one reason, because it drives a lot of the market. one place to keep a close eye on is what's happening with the semiconductor etf. it's down about a percent today, but let's take a look at this. over the last year, we talked a lot about the weakness in semis, how it could be a leading indicator for tech, but this leg right here is year to date it's up roughly 16% on just the year-to-date basis, very early in this year watch semis. they're off to a fast start. we'll see if that can continue and of course, the megacap side of things is what drives so much action in the market these days. whether it's tech, communication services, consumer discretionary, apple, microsoft, alphabet, amazon, and tesla among the biggestinfluences in that market. apple is up 1% today we're going to key on specifically what's happening with microsoft and alphabet. now, alphabet we know, kelly just said, earnings after the bell today, but also, alphabet shares down about 1/3% the department of justice, we know in the last few moments, has formally now charged google,

the division of alphabet with anti-trust violations, resulting from its digital ad business this is following up on another anti-trust that the doj has with their anti-search business for right now, apple is the only one in the green i'll send things back over to you. >> we'll have more details on that shortly as well, dom. markets may be hoping for a slower pace of tightening to lift stocks this year, but my next guest is not sharing the enthusiasm he says stocks could drop softly on the debt ceiling fight. joining me now is brian reynolds, the chief market strategist at reynolds strategy. great to see you again, brian. >> hey, kelly. >> so we should point out, when you look at the manufacturing data, you are not that excited by what you see? >> no, excluding autos, manufacturing entered a recession in april they're trying to cut their inventories, we produced way too much stuff, way too much stuff

came through our ports a year ago and we have a glut of stuff. that's why we're in a manufacturing recession right now. >> and you look at this and it makes you pause on the market, so there's two issues. there's what's going on with the business cycle and on top of that and not helpingis this debt ceiling issue and you say the debt -- we're not talking that much about the debt ceiling you think this one could be worse than what we saw in 2011, is that right? >> yes, you and i talked about this a dozen years ago we went through the up and the down and it led to volatility. it led to almost a 20% sell-off in stocks in july of august of 2011 we lost our aaa rating as a country. we're now aa and it's going to be more impactful this time around >> you're seeing it already in the bill yields, you think >> it's already happening in the treasury bill market treasury bills are the short-term part of the government bond market, and we're already seeing a dislocation of 15 basis points around those bills that are going to mature in late july, when we're likely to run out of

cash nobody wants to own them they're being aggressively sold. that's raising the cost of our debt by 15 basis points. that's going to get worse as the deadline approaches, because money market funds are going to sell those bills as they near maturity >> you know, i don't like lollapaloozas. let's use the term brian, we have a deeply inverted yield curve. it's like, here are all the precarious things that could go wrong. we have deeply inverted yield curves business cycle looks like it's turning over debt ceiling battle that looks like it's going to go to the finish line or beyond. that's how you can start to get really indodges now shocks a couple standard deviation events for the fm markets. i'm just saying, i can understand why people are concerned. it's a little surprising that risk has done as well as it has so far this month. >> that's because this is an esoteric thing right now these are six-month bills that are being impacted and in three months, there'll be three-months

bills, and that's when people will realize that the yield curve is going to endure even more as money market funds sell those short-term bills and go into ebow with the fed people in the stock market are already on high alert for an inverted yield curve this is going tiny voter the yield curve even more starting in april >> it's a great point. i love your point that we sort of forced everybody into treasuries only to hold a gun to their head and say, actually, we might default on them. >> now they have to own treasuries because of the regulators and the same government that forced them into treasuries is now threatening to default on treasuries that's crazy and that's more impactful than it was in 2011 >> absolutely. so they're saying, just go to the fed, the fed will help you the whole thing makes your head spin let's bring in someone else who has been watching this issue very closely you just heard liz young talking about how great the asset class looks. it looks even better right now, rick >> oh, boy, they couldn't get these two-year note yields fast

enough as a matter of fact, they bid it right into the highest price, right into 1:00 eastern, when it buttoned up. the yield, 4.139 the lowest trade i even saw on the one issue market at 1:00 eastern was 414.5. so you can see that we really, lower yield, higher price, when you're selling, you want a high price. we gave an "a" for demand. all the metrics were outstanding. the one fly in the ointment, direct bidders was a bit below the ten-auction average. but considering how it priced, it still delivers a solid "a." i completely agree with the guests, we'll continue to see the t-bills force bigger inversions and don't count out the mid-to-longer end, doing its piece of an inversion. because obviously, the slowing of the economy is going to be a big deal the only fly in the ointment i see is bad energy price is going to catch up with us. china's reopening. and we can talk about all of the inflation it's going to bring

with commodities, but i don't think any of that's a problem. i think energy is the commodity that's going to be a problem with the chinese reopening >> it's a great point. kind of the worst case for the u.s. consumer for some businesses as well brian, back to you for a couple of final thoughts here you're very pragmatic about what you think this all means for investors, that they should be selling any rallies right now. >> yes, the yield curve is going to get more inverted so i'm right on with rick. as these bills mature, their yield will go up and people will sayworkers, that's a problem i think that means a drop in stock prices, similar to what we saw in the summer of 2011. and that will get congress' attention. and then when some faction gets blamed for the drop instock prices, they'll reach a agreement like they did in 2011 and stocks will go rocketing higher, but not until then >> and this time around, you have to figure out how that's going to work with recession dynamics, given that you are a little concerned about manufacturing, how does that overlay about a slowing economy change what otherwise would be a

market rebound like we saw in 2011 >> well, i've written that -- and i talked about this last month with you when people feel the fed is done, money market investors are go out of repo and into bills and they'll steepen the curve. first, the curve has to get more inverted as they get closer to that debt limit battle but when that happens, when the curve starts to steepen, that's when stocks will rebound and start to go up, because they're anticipatory >> but bottom line, you basically think it still boils down to, the fed needs to stop tightening for all of this to then take place? >> that's part of it most people are factoring that in but now we have the debt limit on top of it, so push that time frame to the down and up move, up to this summer because of the debt limit battle. >> brian, we'll leave it there thank you, as always, brian reynolds with reynolds strategy. you heard rick mention energy. could it come in and spoil what's happening this year big oil has already had a big run. occidental's up 90%, exxon's up 52 kt, conoco, 45%, chevron, 42.

this is all over the past 52 weeks. my next guest says there is still room to run. we don't want to hear that neil meta covers energy for goldman sachs. he's here along with our very own pippa stevens who covers all things energy for us as well neil, i'll start you is it a china story? if the u.s. is slowing, how do you get higher oil prices? >> as we think about the range for oil prices over the next several years, we do believe in a higher for longer commodity environment. we think of the lower band being about 80-dollar-a barrel brent you can disincentivize and you destroy demand on the other side of it so 80 to $100, $90 at the midpoint if you look at the forward curve, out the curve through the end of the decade, it's in the low-to-mid-70s we think the forward curve needs to roll up, and as that happens, we think energy equities can perform well as it relates to china, i think china right now is bouncing

around 14.5 million barrels a day of oil demand. it's on its way up to 15.5 million million barrels a day. that typically equates to $15 on price. that should be a supportive factor as you work your way through 2023 >> right now, we've already seen gasoline prices go up, i think it's 30 cents or so from the lows what neil's talking about is not catastrophic, but it would add to more pressure on anyone on the flip side of these costs >> exactly and we'll see that in the upcoming inflation report, because that was such a big driver of december's numbers coming down. and if we no longer have that to rely on, what does that mean for the economy more broadly and we have all of these catalysts still coming up, like the ban on russian products that the market is not anticipating or factoring in. and it seems like there wasn't an initial drop-off in russian production, maybe the market thinks it's not going to be as severe as those initial forecasts back in march of last year but the thing is that they're still working their way through the market, and over the longer

term, this will meaningfully reshape the energy market. so prices have come down, but there are still a lot of unknowns >> it's a great point. the difference between headline timing and an actual implementation and neil, all of this said, in sort of the macro case for energy, you still see some differentiation here you're bullish more so on exxon and conoco than on chevron why? and nat gas, meanwhile, we've seen prices collapse >> as we think about the big oils, they tend to trade with a lot of dispersion. from 2014 to 2016, you had chevron materially outperform chef ron from 2016 to 2020, you had chevron materially outperform exxon. in the last two years, you've seen exxon do better we think that the ingredients of that continued outperformance of exxon are still in place management and board turnaround. a significant amount of cash going back to shareholders you heard pippa talk about the tightness that we're seeing in the refining markets that bodes well for exxonmobil,

which is legacy standard oil has 5 million barrel days of refining capacity. and they have very differentiated upstream projects, particularly in guyana, which continues to grow. it's going to grow from about 0.4 million barrels a day to 1.3 million barrels a day to next decade it's very interesting. so exxon to us represents one of the most interesting big oils even after the outperformance. >> and pippa, people are still desperate for returns and what looks like another difficult landscape for equities here. any readthroughs from halliburton, some of the rest of the space that could tell us, okay, demand is still going to be robust even at these higher prices we're not seeing that pullback yet, as neil says, if we're going to be averaging 80, $90, $100 a barrel. >> international remains a bright spot, especially for the oil services company, but one interesting thing, companies have been rewarded for keeping their capitol spending in check. but at a certain point, you have to meaningfully reinvest below

just flat to 5% annual growth or to keep growing earnings so i guess at one point does that tide turn and at what point do we see companies saying, we're actually going to spend on new production, versus capex being up because of inflationary pressures. >> or would investors prefer them to hand back the cash and not bother with new projects in a world that's moving towards alternative energy >> it's always a balance we've got to invest in the transition, but also have to be pragmatic about what a realistic level of oil demand is going to be many 2030 we're at $100 million barrels a day. by the end of the day, we'll be at 107 million barrels a day there is a national geographic decline in oil assets. the u.s. will grow, but the second derivative of growth is going to slow. we will see more activity in the uae and in saudi arabia, which posed well for the services companies. but we are not opposed to oil companies investing in differentiated projects that are return enhancing, because the

world will need it for a long time >> kind of overlooked, underowned, cash flow generative, to say the least we'll leave it there neil and pippa, thank you so much neil with goldman and cnbc's pippa stevens. still ahead, we're going grocery shopping on wall street. when could prices start to drop and who's best positioned for that we'll dig into it ahead. and from the checkout to china the company's reopening expected to be a boon for luxury stocks, but will it really the names most poised to benefit. first, though, three more big names with earnings on deck. we'll bring you the action, the story, and the trade you know one of them will be microsoft. as we head to break, let's get a quick check on markets the dow erasing a 319-point loss to turn positive by 96 the ten-year yield, 347. we we're back after thi

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. welcome back, everybody. this is why -- okay, it's time for another edition of earnings exchange, where we give you the action, the story, and the trades for some key names on deck we're going to begin with kimberly clark you might think staples are a great trade right now, but they're coming off their worst year since 2018, kimberly clark is they've also missed wall street estimates on four of their last eight reports.

cost and logistics, those are some of the big headwinds, but dom chu is here with the story, and david katz is a chief investment officer and he has our trades today .com >> so the set-up here is, you laid it out perfectly. consumer staples companies, especially the ones with big brand-name portfolios are in focus. if you look at kimberly clark, it's going to be $1.51, that's what you're looking for in terms of earnings, about $4.1 billion overall in terms of revenues what you're going to watch for, as with every consumer products company out there is what's going to happen with regard to their international operations many of these guys have international exposure, so ku currency headwinds in fx will be a problem and/or tailwind depending on how things work outs the other things to watch for, it will be about the brand portfolios that they have. are people willing that pay up for those things like kleenex tissue, cottonelle, or huggies diapers. that's going to be big and the other thing to watch is

whether or not there is still pricing power in the brand portfolio at a company ik kimberly clark the one thing we learned this season early on from procter & gamble, which is literally the behemoth when it comes to consumer products, is that they did raise prizes and they were able to do so, but they saw a drop-off in sales volumes, which means that consumers might be pushing back on some of the prize increases that they are seeing in this inflationary environment. and by the way, the chart we're showing you right now is the one-year performance of procter & gamble, which is a $335 billion market cap company, and kimberly clark, which is roughly $45 billion. if you want to use procter & gamble, that's probably like the bench market right now for what you're going to want to expect or see out of a name like kimberly clark and colgate-palmolive. >> and kimberly clark about 22 times right now. so not crazy

david katz, what do you think? what would you do with kimberly-clark here? >> we think the key right now with kimberly is for the last two years, they've been very hit or mess. the last quarter was the first time in some time that they've did a little bit better than expectations they're controlling their gcost a little bit better. if that continues, we think the stock will be a good stock for the next 12 months we're pretty cautious on consumer staples in aggregate, but we like kimberly one of the best it does have a 3.5% dividend yield, which is good and we do think that even though it's at 23, 24 times earnings, that it's underearning because of the cost problem. if they finally get their act together, we think it has pretty good earnings leverage we wouldn't buy today, but after the earrings were released, we're very comfortable buying it here >> we talked about some of your hesitance with the staples more broadly, but i take your point about some of the to become cease specific reasons here. >> and if the stock disappoints and it does sell off by 5, 8%,

which which it has done for a number of quarters, we would step in. >> all right, fascinating. let's see if it holds for abbott david, stay right there. abbott labs is down about a percent today. it snapped on a 22% loss last year and they beat earnings estimates for eight straight quarters, but they are, meg and i know well, facing this doj investigation into manufacturing of baby formula. welcome, megan war you watching >> that is one of the things we're watching macro questions persist here, as they did this morning for all the earnings we saw with j&j, that was something people were really cautious about. but covid testing is still an issue for abbott there could be a potential upside as people are expecting those revenues to come down with where we are in the pandemic, but could we see some upside in the fourth quarter of course, post-pandemic recovery in their medical device sector, that is something with j&j we saw a little bit soft today, although there is a recovery happening back to

pre-pandemic levels in terms of the procedures people are having done and of course as you mentioned, the baby formula investigation that coming out friday night the department of justice looking into the plant that makes that baby formula. we'll see whether the company says anything else about it in their release or on their call we know analysts will probably be asking about it, whether they will divulge more and how much that matters to the stock. >> have we gotten any sense, as we were just talking the other day about johnson and johnson and the legal there. has anyone kind of estimated the potential legal exposure that abbott could have here >> ic haven't seen anything alog those lines and there wasn't a lot of reaction about the investigation. it's something i'm really interested in learning something about. how much of a risk is this for abbott investors, or is it mostly that the negative attention will continue. >> that's going to be a major question for them to answer. what do you do with the stock here >> so abbott is a really well-run company they consistently make their earnings if you look at the earnings

comparison between 22 and 23, earnings will drop significantly, because we're losing the covid testing with earnings declining and the stock selling at about 25 times next year's earnings, this is a good company that's fully priced and we would pass. we do like medtronic a lot better in the med tech area. that else at about 15 times earnings with matchup higher yield. so abbott, very good business, but we don't want to own it. >> you stick with medttronicmed. last, but certainly not least, microsoft. after the bell, had its worst year since '08. they've topped estimates, but have also laid off 10,000 people >> just a tiny $2 trillion company reporting after the bell so kelly, the mantra from satya nadella and company is do more with less. and that is exactly what microsoft is going to be having to do itself 10,000 employees got the axe last week. we know that already we also know they're investing

billions of dollars in activision and chat gtt. now, things we're going to have to look for on the left side is cloud growth cloud growth is slowing down before, you know, in quarters past, we would see high 40 percentage points or and 50 percentage points in azure growth that's going to go all the way down to about 36 to 37%, according to the wall street estimates. and look, that is because of so many headwinds facing the cloud business you have foreign exchange and reduced spend among small and medium businesses. that's what's hurting cloud growth, and we've got to talk about consumer demand, kelly, windows, people are just not buying pcs the way they were during the pandemic and that hurts the more personal computing businesses that hurts licenses as well. >> the bread and butter. about 24 times forward p\e, david katz, would you be a buyer of microsoft here? >> not before the earnings, but tomorrow, we absolutely would. we think this is a great

long-term business, management is really good they're very focused on running the business well. they control costs a lot more than other technology companies. they are confronting a lot of headwinds. a little bit cautious going into earnings we would wait and see until we hear what they say, but after that, for those that have a 9 to 12-month time frame, this is a really good buy. we're very happy entering here the stock was about 120 points higher a year and a half ago so you're getting that great business at a much better price. >> do you, david, like the megaspend on chat gdp and the tack they're taking, versus facebook going more in the meta verse direction? >> we think it makes an enormous amount of sense. it really positions them very well for the long-term, if this artificial intelligence works on the search side, it repositions them and puts them in much better instead versus google we think this is a very smart business move. $10 billion is a huge amount of money, relative to microsoft, it is a manageable amount of money.

we think smart investment and that's why we like management so much they're really focused and trying to get a bang for their buck >> whisper wise, what do you think are really expecting tonight? when i have people in the inbox say we're bracing for their results, it feels like the bar is a little bit lower. >> the bar is lower and the layoffs have signaled, hey, we're not going to do as well even as we anticipated that we were going to do those layoffs will help, and the costs related to those layoffs, that's going to shave about 12 cents off epps, $1.2 billion off of revenue these are costly layoffs, on top of all of those other investments that you were talking about. and guidance will be super important. >> true. great point. we'll leave it there steve, thanks so much. steve kovach and david katz, thanks forall your trades today. still ahead, so much for lakefront property in arizona. the water crisis there creating real risks for real estate we'll tell you what it means for developers, investors, and the housing market plus, the doenj filing its

second anti-trust lawsuit over google in about two years. we'll speak to one monopoly expert about it and the taylor swift buzz on capitol hill today. and here's a look at the dow heat map, 3m, walgreens, merck the biggest laggards "the exchange" is back after this is a giant pain! hi ladies! alex from u.s. bank! can she help? how about a comprehensive point of sale system... that can track inventory, manage schedules- and customize orders? that's what u.s. bank business essentials is for. (oven explosion) what about a new oven, can u.s. bank help us there? we can serve loans in as fast as 12 minutes. that would be a big help! huge! jumbo! ginormous! woo! -woo! finding ways to make your business boom. that's what u.s. bank is for. we'll get there together.

welcome back it may not look like much, but we are at session highs from the dow, from a loss of 319 to currently a gain of 72, the s&p and nasdaq just a few points away from turning positive as well let's get to tyler mathisen from the cnbc news update >> here's what's happening at

this hour. the mass shooting in half moon bay, california, was likely a case of workplace violence authorities say the suspect was an employee at one of the two businesses he attacked, leaving seven dead and one seriously injured. meanwhile, the suspect in another mass shooting a still at large. this one in washington state, where three people were killed at a convenience store it is at least the 40th mass shooting so far this year. we're not even done with january. that number translates to roughly three every two days and more classified documents have been found, this time in the indiana home of former vice president mike pence. his lawyer says that quote, a small number of documents were inadvertently included in boxes of papers packed up when pence left office in washington and that he was not aware of their existence. in the past, pence has repeatedly said that he had not retained any classified documents from his time, kelly, as vice president.

back to you. >> all right see you soon, tyler. thanks still ahead, the doj along with eight states following an anti-trust lawsuit against google and its digital ad dominance, sending shares lower by about a percent meantime, live nation shares shaking it off and moving higher today as its president testifies on capitol hill over the taylor swift ticketing debacle back in november we'll examine althl e anti-trust latest with a former ftc lawyer right after this and the pain in the back of your eye is forcing bad words from your mouth, or...the bags under your eyes are looking more like purses, it's not too late for another treatment option for thyroid eye disease, also known as t-e-d. to learn more visit treatted.com that's treatt-e-d.com.

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welcome back, everybody. the department of justice along with eight states have filed an anti-trust lawsuit against google for its digital ad business you can see the shares down about 1% this on the same day that the senate judiciary committee is wrapping up its hearing on live nation, that taylor swift ticket sale debacle last fall to see whether ticket master should be spun out from its parent company. those shares, by the way, up 2%. deirdre bosa has the latest google headlines for us, and julia boorstin has the hearing updates. welcome to everybody deirdre, we'll start with you. what's the latest? >> we just got a statement from alphabet and they're hitting back pretty hard let me read it to you. alphabet says the doj is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow now, google here is referring to a number of other outstanding

lawsuits ds against the company, including a first one by the doj that was filed during the trump administration that doesn't go to trial until later this year, september that indicates how long these things can take to work their way through the system and why you're not seeing much of a reaction in terms of google's stock price investors typically have been fairly complacent about these things, because they do take so long and we haven't seen a lot of action the doj is arguing that google operates on multiple sides of the market, buying, selling, the auction process, collecting fees and data along the way the doj says that google realized that it could, quote, become the be-all, end-all location for all of ad serving but of course, goes back to my point that google has been facing this kind of scrutiny for years. european regulators have had more success in winning some concessions, not so despite the scrutiny here in the u.s again, perhaps, why the stock is off its lows it did move a little bit on that news >> before we dive into the

issues at live nation, do you want to offer a comment on this particular anti-trust issue on the ad front with google how do you expect this to play out? >> i agree it may take some time to resolve this, but there are some serious competition issues here and if you look, for example, at the way in which ad prices are set and the role that google plays on that, they're on both the demand side and the supply side they run a demand server that bids for ads and they run the supply side, where those ads are auctioned off. and the uk competition authority in 2020 including that they were using their dominance in this area to exclude other people who might be competing, either running demand-side servers or running supply that is they, the uk competition authorities said that they were

denying -- >> let's turn to julia, as mark unfreezes there, shall we say. it's kind of ironic, julia, that all of this is happening on the same day and harkens back a little bit to the microsoft issues as well how much of this is about live nation and how much of this is about the climate in d.c. in general towards deals right now? >> i think it's a combination of both there was a lot of conversation in the hearing about an increased interest in anti-trust issues, but i also think that live nation is a company that has drawn a lot of scrutiny ever since that acquisition of ticketmaster back in 2009. senators on both sides of the aisle today criticized live nation and questioned whether its ownership of ticketmaster harms competition. now, live nation's cfo and president joe burke said he blamed bots and scalpers for the

taylor swift ticketing debacle, saying that live nation's artist payouts have been increasing over time and that ticketmaster has actually lost market share kelly? >> it seems like the main thing investors want to know here is will ticketmaster force them to spin it out? >> it's hard to predict how litigation will go, but i think that there is evidence going back to 2010 that anti-trust enforcers are really concerned that live nation would use its control over promotion to advantage its ticket business. in 2019, the doj found examples enough of live nation doing exactly this, that they revised the settlement and said that they were going to post fine for further instances of this kind of behavior. and now, i think, there's

another investigation going on from doj and if they turn up more evidence of this, i think they might well ask for a structural remedy, which would mean divesting ticket master. >> julia, what are you hearing do you think that that would happen >> well, there was definitely a call to break up ticketmaster from some of the senators today. amy klobuchar saying that what you're seeing here is a perfect example of a monopoly. but i think we have to look at the fact that this deal was approved in 2009 and there was a consent decree and live nation agreed to certain policies to the fact that they would not have any sort of retaliation against the venues that decided not to go with them and to go with a different ticketing service. and i think the question really here is, is there compliance with the dissent decree, and if not, what will the remedies be for that and in general, there's a call to break up live nation, but we'll have to see if there's anything that will be an intermediary step before day get to that it's a very complex

situation and could have a solution other than just breaking it up >> all right and before we go, deirdre, for google shareholders who appear not terribly concerned, even after they heard mark addressing there, do you think this could turn into a bigger long-term headwind, in the sense that it's a distraction at the very time they need to be rivaling microsoft with their ai investments, for instance. >> it's a good question and a debate that we've probably been having for years does all of this amount to some kind of distraction, basically because no one really thinks that there's going to be any relaxation if you look at europe, they've managed to win some concessions, but fines in the billions of dollars, but those amount to speegd tickets for the companies. it's spending a lot of money on lobbying, as well. it's really uncertain, but certainly in this moment when the senator and his team are facing a softer macro economic backdrop is this harder, more of a distraction with potentially less employees than they do

layoffs. it's a good question have to see how it ends up but investors complacent >> i like the speeding ticket analogy. if you get pulled over too many times, you get your license taken away deirdre bosa, julia boorstin, mark, thank you very much. last year, the howard hughes corp. had grand plans to build se0,000 homes in the arizona dert, but those plans have since dried up the latest developments on that development, next.

welcome back to "the exchange." last year, we did a story about a massive housing development in the desert, but a report released by the state could prove a major headwind >> we reported on the howard hughes corporation developing one of the largest in the

station. there was enough water, despite an historic drought, but that is no longer the case the 37,000 acre community is supposed to eventually have more than 100,000 homes, with big public builders already expressing interest in the project, according to howard hughes corp., whose ceo told us last spring that there was adequate water >> this area in the west valley of phoenix is absolutely sustainable and viable forever not just for the next few years. >> but arizona governor katie hobbs just released a report from the state's water department, showing that over the next century, there will not be adequate water and saying that the arizona department of water resources cannot a i prove the development of subdivisions reliant on ground water. o'reilly's team sent a response saying that they are still committed to the project with the first phase now underway and will continue working on water conservation and reuse measures, so when the time comes to expand, we are ready to do soi a way that ensures the

prosperous and sustainable future for the west valley i spoke with several analysts who cover howard hughes and they agreed, it has not hit the stock yet, because it's already been under pressure be it the rising rates, and because the development is a multi-decade-term project. right now, it's only a small part of the business, but the company did pay 600 million for that land, and of course that presents a risk going forward, kelly. >> and we're in a climate where people are still asking for more housing supplies saying we're undersupplied and we need it to kind of help affordability. so on the one hand, this could put a dent in that, but on the other hand, i'm not sure if there's any communities left where there aren't so many fights over resources that it makes these projects very difficult to pursue. >> that was o'reilly's argument when we spoke to him last spring, we said, we desperately need land that we could put 100,000 homes in and bring thousands of people into it. but the question is, you know, as climate change progresses, as we see more intense drought and

more intense flooding, et cetera, we're going to have to decide where those developments and those communities are going to go. >> diana, thanks for now, diana olick. still ahead, shares of lvmh posting a gain of nearly 1% just over the past month, boosted in part by china's reopening. we'll dig into the other luxury names seeing big moves next. but investors may want to remember steven roche's warning about the recovery right here on "the exchange" yesterday take a listen. >> the current leadership under xi jinping has moved the needle on reforms with impacts on productivity that i think are very, very worrisome and a deepening chinese conflict, which i've just written a new book about, is causing further problems for china on the technology front that are likely to be long lasting lily! welcome to our third bark-ery. oh, i can tell business is going through the “woof”.

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welcome back to "the exchange." we've all seen the absurd cost of eggs whose prices rose 60% last year according to epi data and while higher costs should give grocers another year of ref knew growth in 2023, as inflation shows signs of cooling, it's the non-traditional retailers that will end up coming up on top let's bring a retail analyst at ubs along with our very own grocery expert dominic chu welcome to both of you michael, what's been happening

with the grocery stores dealing with the price hikes >> what's been happening with grocery stores it's been a trick environment to navigate through and an argument that it's going to get even more precarious in 2023 as, a, the economy weakens and that it causes consumers to trade down within the grocery store and among different retailers. b, there's going to be disinflation, so those elevated price increases that are in the double-digit range now are going to decelerate over the course of the year, and by the fourth quarter it could be flat prices could be flat and then finally, we expect to see a rise in promotions on average prior to the pandemic about 35% of the sales in the grocery store channel were done on promotion that over the last few years it's because of the unique set of circumstances was down to 30%. we would expect it to rise to more historical levels

as a result, our argument is it's best to stick with the well-positioned retailers like a walmart, target, a dollar tree who tend to navigate these circumstances in a better spot. >> i love the channel index. you go into the richmond area, looks like walmart is in the discounting mode prices creep up until people are laser focused on price and then they have to make sure they are leader again. >> and then you advertise the rollback for somebody like walmart. >> exactly what's interesting about this, i tweeted about it earlier this week i.went grocery shopping and everyone focuses on eggs, this year's gasoline prices all of a sudden the stop & shop grocery store which is where i go mostly advertised how they are rolling pack the price of eggs, right, by 50 cents a dozen but it's still something. >> trying to grab your attention. >> trying to grab your attention. what's curious about this, i like michael's thesis because so much americans can relate to what's going on. there's an econ101, you know,

concept about the substitution effect. >> exactly. >> and a lot of folks out there, if you don't have constraints on your diet, don't have to keep kosher or hilal, that kind of stuff, you can actually say, hey, if the price of beef is sky high and the price of pork is lower relative to that is correct i'm going to buy pork for the time being as opposed to beef or if it's milk, this brand versus that brand. you get that effect, and i think that to michael's point is what a lot of people will be doing because they can find the relative bargains. i have to have milk. i would rather trade down and get the cheaper one. >> michael, you mentioned this, walmart, target and dollar tree are your top picks it takes something like really high inflation, whether a particular product, or across the board to say maybe i'll try aldy or little or amazon prime, you name it. are you seeing that kind of behavior >> there is some evidence that right now consumers are moving around, in the only within the store. they are going to trade from pork to beef or beef to pork

it's also i was going to my conventional grocery store and now with prices so expensive, i'm going to shop closer to home, ear at the dollar store or i'm going to go to a discounter like aldy or lidle what they are doing is forcing the consumer to focus hard on what they spend an where they spend it and that's beneficial for a walmart, a dollar tree, a target, that help consumers stretch their budgets. >> still, obviously, you unpacked it well no pun intended. >> i would also say a lot of viewers know i'm a costco fan and people see me at my local cost co-quite often. that the trade effect there is to buy in bulk to try to save money as well. >> 100% that could benefit them. >> thank you, michael lasser, joining us from ubsa and our very own dominic chu. robert francke is here to explain the effect of reopening

china. >> yeah, kelly, luxury bulk buying in china, the big bang for luxury stocks. china's reopening driving shares of the luxury giant up double digits just this mon lvmh up 16%, its market cap over $26 billion, the largest company in europe by value you' looking at hermes and other brands that could grow 25% to 35% as well as the rise in domestic sales, chinese tourists expected to return to europe this spring in their summer where prices for hand backs, shoes and other top luxury goods can be 30% lower burbury siting very luxury signs and omega is up 5% today on the forecast of a record 2023 driven

by china china had been the top luxury market pre-covid accounting for over a third of all sales. last year that fell to 17% with the u.s. taking the lead kelly, the big question now and for whether the stocks have run too far too fast is whether u.s. demand can hold up as the economy slows. we're going to know a lot more when lvmh, the dominant in this whole group, will report earnings on thursday >> even ge offering a bit of a window into this morning, robert, saying there's seen a huge snapback in chinese travel demand >> yeah, and we're seeing a little bit of that as well in hong kong, macaw and this is a huge travel base that hasn't gone anywhere in a year and a half and given the currency rate and the relatively weak euro there will be a lot of shopping this spring and summer, especially for luxury. >> a rate it for now, that's robert frank

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it's a place to change the world. loopnet. the most popular place to find a space. ♪ hi, everybody. welcome to "power lunch. along with tyler mathisen -- oh, wait you're tyler mathisen. >> i'm tyler mathisen and you would be kelly evans. >> i'm sorry. >> glad you could join us today on "power lunch. coming up microsoft, the big earnings reports due after the bell a lot of issues, recentoffs, the cloud business and more. the investment in ai we'll break it all down. now. >> thank you plus, a couple of big ceo interviews coming up, we'll talk did fence with the head of lockheed martin and we're waiting to h