good wednesday morning i'm sara eisen with carl quintanilla. we are live for you at the new york stock exchange. setting the agenda for us today, canyon partners founder and ceo josh friedman with us here on set saying the worst of the banking crisis is not behind us yet. >> plus, barry biffle, his outlook for summer travel demand and we are all over the sell-off here in the markets right now. take a look. s&p 500 down 0.6%, not extreme,

but utilities are leading. up 2%. health care and consumer staples, so definitely defensive. the cyclicals are selling off for the second day in a row and technology under pressure. consumer discretionary down 2%, as bonds rally off the back of a few data misses. we'll start with the rally we're seeing in the bond market. the ten-year yield, breaking that key 3.3 level we're below that right now the latest employment data coming in lighter than expected, as pay growth inches lower ism services also coming in below consensus. in fact, services prices paid, an inflation index, lowest level since 2020 and then you've got the cleveland fed president reiterating her call for rates to surpass 5%. to help break this all down, let's bring in cnbc senior economics reporter, steve liesman. and steve, for the first time in a while, the data is kind of all pointing in one direction. which is weaker, including labor market data. i know adm is not the most reliable indicator, but on top

of the lower openings, job openings data, it's telling a story. >> yeah, and here's how i might frame it, sarah. things are sort of getting back to normal toward the weak side and the question is, do we pass through normal en route to a recession? and let me just show you, first of all, let me back up exactly what you just said we've got a chart for all the data we've had this week, that is the most important stuff that the market has been trading on and what you see in the screen there is that it's all been below expectations from the job market data, to the manufacturing data, adp data all of that data has come in below expectations and the bond market has rallied pretty much on every one of these points and the stock market, interestingly enough, because this sort of takes away from the idea, maybe the fed will do less, the stock market has also sold off on this, not necessarily rallied on it, which has been interesting, and then the other thing i think you

might want to look at here is the prices paid data that's the thing that's kind of normalizing on both ism services and ism manufacturing. so, the inflation data has been pretty good. along with the thing that's not really followed very much, sarah, the deliveries index. so the delays in delivery, the supply chain stuff is easing and it's better than it had been before the pandemic, at least by nose gauges. >> one point i made, it's a little jarring to hear some of the key fed members come out and still talk about higher rates and more restrictive and we have a lot more work to do on inflation, because that is not jiving with what we are getting in terms of the data >> no, the trouble is this, sarah. some of the stuff we're looking at in terms of the inflation, it shows the direction, but doesn't show the magnitude the ism inflation or prices paid indices are key in that regard you're right, though, the thing is that the fed is looking at

this long period of time when the market is trading right on the data, as it comes out. and who knows if they're wrong, but you do know this, sarah. the fed has been burned by being too optimistic about inflation too early. and it doesn't want to, i think, that to happen again in terms of saying, oh, things are going good, we can pause here. and all of a sudden the inflation pyrfires up again >> true. i think they already lost some cred on inflation being late on the whole transitory thing steve, thank you >> with that outlook in mind for rates, let's get a check on what's next for the financial sector and the overall economy our next guest thinks we're not even through the worst of the banking situation yet, saying recession looks like more of a possibility with an eye on weakness in real estate. joining us now, canyon partners cofounder and co-ceo, josh friedman it's good to see you in person >> nice to see you, too, in person >> even though it sounds like you're the bearer of some bad news what do you see for banking? >> it's hard to know and depends a little bit on what the fed does it's hard to see why someone

would continue to hold a deposit in a banking institution when they can earn so much more money on a money market fund it reminds me of the days when i first started in the business in 1981, taking my student loans with my partner, mitch, and putting it in a fidelity money market fund. these are basically risk-free types of assets on the other side of the balance sheet and they have higher yields. it takes money out of the winnings system and it jeopardizes these key financial institutions that play an important role in our economy. >> we've already seen the trend. we're now at record highs, right, in terms of money market fund flows so what does this mean for banks? lower earnings and then what >> well, we've seen half a trillion already flow into money market funds in this last little phase. and if rates are raised again, we could see that happen again, easily sentiment is a very delicate thing. and it's quite easy to see how this could become a contagion pretty quickly now, i assume that the officials at the treasury and the fed will be somewhat calming in the face of that, if it happens but it causes significant

tightening by banks. it's hard to make a long-term loan into an illiquid security, essentially, a bank loan, when you don't know if your deposit base will be in tact you see an immediate tightening in the extension of bank credit, both to companies and to realize. and we've seen that pervasively already. you also see outflows from other institutions like high-yield mutual funds and even other fixed income mutual funds. it's something like three quarter of a trillion dollars have already been withdrawn. because why should someone take the risk of long-duration paper for a relatively small yield advantage, when they've seen that number go down, as rates have moved up at the end of last year and now they have the opportunity to put their money on short-term and earn a higher rate >> it sounds like you think the fed would be making a big mistake if they keep raising rates? >> i think there are risks if they do that that could be quite significant to the banking system and i don't think it would be wise at this time. >> goldman's got a note out just now, they're looking at the spread between short-term

interest rates and bank deposit rates. they say that deposit rates are low, but they're going up faster than in prior cycles is that what we want to see or not? because of the pressure that you would get on lending and earnings >> i think we need to see that and that will put pressure on bank earnings, because that's their cost of capitol, the cost of their deposits. so that will cause them to reflect that in higher rates that they charge borrowers, and they'll continue to be quite stingy in their lending. we've seen an explosion in the private credit world that's because banks are not filling that void. >> i was just going to ask, where are the opportunities for you, josh. this is the time when you tend to get active, right when there's problems. >> it's been a long time coming, sarah. we've been sitting with zero rates, zero spreads, and zero covenants, which is an awfully tough environment. but i would say this, probably three to four different areas that are critical. the first thing is, when you have a high-yield mutual fund or some type of holder with a long-term bond and a low rate and low covenants and so forth, when they get redemptions from

those funds, they need to sell those the same day they have daily liquidity to their holders. they're selling into an illiquid market so you've seen astonishingly low prices on some very good credits. that's the very first thing that happens. the second thing is you see the bank tightening credit, dwhich s what we were just talking about. there have been become opportunities across the spectrum for non-bank institutions to make loans at much more attractive rates with much less competition from the commercial banks that's the second area i think that ultimately, we will see a true distress cycle as a result of this, as well. we're starting to see demand soften up. we've talked about how apartment sales are down 74% and home sales for purchasers in new york are down 35% >> except for all cash >> yes, exactly. >> except for all cash, but even those, you can now take advantage. we'll see more transactions when the lower prices become compelled by sellers who can't

refinance. >> that's interesting. so peak-to-trough, what do you think medium home price does in this country >> it's hard to know i don't know the answer to that. i really don't, but i do think that we're in the process of price discovery now on all sorts of real estate assets. so, i think in the distressed world, you've got many, many corporate issuers owned by large private equity firms that have seven turns of leverage, which when they refinance at 11%, between that and capital expenditures, there's zero amortization those will become stressed and distressed, some will be -- and a lot of those securities are already trading at 20 to 30 points discount to par >> on top of that, others would argue, is that you're dealing with this return-to-office chapter, which is completely new and doesn't make prior cycles rhyme with this one. do you agree with that >> uh, yes, i do agree with that i think what does rhyme is the capital structure misalignment,

these sort of zombie balance sheets in the corporate world, on many private equity companies, including owned by the largest sponsors is paralleled by zombie spleet bale sheets on high-quality real estate assets. what you talked about, with carl the migration into the office, out of the office, people finding, hey, i can live in another state. people changing the use of commercial real estate, so that "b" office is pretty moribunt right now. the first to fall are always the lowest quality ones. but in higher quality, you've got almost a million apartments, i think 800,000 apartments that were being constructed, starting in the last 24 months. those are work-in-progress construction when those are completed, i can a sure you that the proceeds that will be received for permanent financing will be a fraction of what was shown in whatever pro formas they showed their limited partner or their

equity holder. that will be a whole other opportunity for people who are opportunistic and clever with capital in this market >> so, when do you step in and buy -- >> i think it starts now, already. i think if you look at the flow today, higher-quality sponsors, lower loan-to-value, higher quality assets already are offering rates that were unheard of a year ago. i mean, completely unheard of. but i think you wade in slowly, you keep cash, you take your time the same exact thing is happening in that universe of corporate stress and distress, where you're starting to see balance sheets that have no amortization so they'll say, i'll stretch this out and move the ball down the field. these companies had almost a complete business interruption for two years. their balance sheets were not constructed with the kind of duration in mind that they need. even for companies that have recovered fully. >> people want to have playbooks that are easy to understand and so they start looking at, okay,

west coast u.s. versus the southeast, or urban centers versus suburban markets. can it be that plain what's the best way to frame it that way >> it depends again, corporate is different from real estate and the corporate tends to span not only the nation, but also the world. whereas real estate is much more of a local business. i mean, it's very clear which business, which states and which cities are benefiting from migration, which ones have inflow, where rent growth still exists, which is relatively few places, even places like austin are starting to have rent shrinkage. we heard barry sternlicht talking on the show about some of those differentials, but it's clear in general rents are shrinking, but in some places, it's shrinking a lot faster than others and those tends to be the state that have out-migration. rents in new york, rents in california, et cetera. and rents in places like orlando or tampa, san antonio, tend to be more stable or shrinking less or maybe even growing modestly >> here's the thing, josh. amid all of this worry and the th distress and the banking

problems and the fact that there are unresolved issues and the potentially harder landing, the stock market has held up relatively well. i saw there was a high-yield bond deal with a bunch of banks yesterday. that got done. people are buying cocoa bonds again. it feels like, i don't know do you think the market is being too complacent or is there a silver lining here in that the fed stops its aggressive hiking? >> i think the equity markets are being a bit complacent if you look at valuation markets off of next year's projections, you're still looking at numbers that look at 85 to 90th percentile on price-to-book, tenth percentile of dividend yield. all sorts of things that indicate that chances are when those projections off which we're doing those valuation metrics were done, were based on lower interest rates than they're actually facing, lower labor costs than they're actually facing, and maybe higher demand than they'll actually be facing if we have a harder landing

i think you have to be a little cautious in the world of equities today at least, one has to think very seriously about other alternatives but that doesn't mean that you have -- let me put it this way, there's a lot of different ways to be participants in the credit market, other than buying the citrix loan. >> right what about the ten-year treasury yield now, below 3.3 >> i think that's again an indication of sort of flight to safety in a world of fear. >> do you think we've seen the high -- the high yields for this cycle? >> i think it's possible the high-yield index gets wider than it is today. i think in individual issues, can trade a thousand basis points wider than that, just because someone needs a bid on a big block suddenly it's not the most efficient market by a long shot. so i think the market's in the non-investment grade credit markets across the board are offering a lot of specific opportunities today that were almost impossible to come by 12 months ago >> and then, the way people want to defend investment grade, that corporate treasurers have all the time in the world to

prepare. a lot of corporate debt is fixed going into whatever cycle we're about to enter does that make sense to you? >> that makes some sense to me and i think high-yield, people have to understand, when they look at the high-yield index and the index itself, this is a higher quality index than existed a decade ago it has fewer low grade bonds and more upper tier high-yield bonds, if you want to think of it that way. the average rating is higher and that's mostly a fixed rate bond index but that can come down and widen, too but we also, for all the banking crisis issues that we have, we're not staring at banks that are levered the way they were levered going into 2008. so, we're not likely to have that extreme amount of ill liquidity that we had in that market but we're already seeing patches of it. >> all right last question. i'm asking a lot of big investors this, especially ones that have made this a focus over the past few years, which is pretty much everyone esg. is that still a priority >> i think esg is a priority at almost every firm that deals

with public institutional investors. i think it has to be and i also think that it's possible, if you do credit-related investing, the "s" in esg has always been front and center the reason companies are in bankruptcy are almost always because of poor social behavior, poor environmental behavior. but people are realizing that esg are all much more nuanced than they thought they were. we saw that with the energy situation in europe and the thought that if we just eliminate all carbon fool immediately, there will be a solution that's clean and affordable and so forth is really a bit of a dream. people are starting to take a much more nuanced and transitional view of all of these issues, but i think it's quite important, particularly if you're a larger firm and running institutional capital, that you have a serious, sophisticated, thoughtful approach to assessing every investment you do, as well as long profitability metrics. >> it feels more complicated in

a world where it's about margin preservation and efficiency. it's costly, too >> i think that whenever people take a first stab at an issue, it's a little bit crude and then it becomes more refined and more nuanced. and i think that's the transition that we're seeing >> so we're refining it. not deprioritizing it. josh friedman, thank you good to see you. >> you too thank you. meantime, strategists are warning about some potential weakness industrials we're going to talk about that, especially coming off of yesterday. caterpillar and 3m are the top laggards on the week throw deere in there as well and then we'll be joined by the ceo of frontier, rising travel prices continue to hurt the fed's flioinatn fight when "squawk on the street" continues in a moment.

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focusing on some industrials today. underperforming the s&p, saying it's consistent with the move to more risk-off leadership in recent sessions. we told you about cat and deere yesterday. pretty rough week for that sector we talked about valero, marathon pete, which jim will address on "mad money." that's been one of the more th thematic shifts for the week >> and this is a classical, cyclical tell, for the u.s. economy and the global economy once we started seeing the data shift, really starting manufacturing earlier in the week and the job openings data,

you know, the market was rallying behind weaker data on the idea that it would mean less fed action, and at some point, that shift, that psychology started shifting, now we have to price in potentially the recession or weaker economy. industrials bwould be the first place you look >> it's amazing the way, you can recall a time when zuckerberg was starting to issue some of those warning memos early on, late last summer in june, let's say. people are saying, what are you talking about? the economy is on fire, if anything, it's running too hot it's an indication of that very early, cautious view >> but everyone has been expecting recession for the last year and a half. and we've all been saying, when is the recession and it's hit business confidence, but the data has remained remarkably resilient. what's changing is that the data is starting to lose steam. it's still not bad, by any stretch of the imagination we're still expanding on services, job openings is still in the 9 million but the cracking is what has the market's attention

and i think people -- how many times have we been talking about recession? the yield curve inverted, what, over a year ago? >> yeah. >> when the fed started tightening, ever since that march, we've been wondering when the recession is coming. now we have a bank crisis and people are thinking it's here sooner than later. speaking of banks, first citizens bank is already out more than 25% this year. ubs says it still has some room to run, after buying some of silicon valley bank assets more on that call after the break. we're also watching fedex today, announcing it will consolidate its operating companies into one organization. we've seen it also up to a dividend by 10%. the stock is up 1.25%. fedex ceo will be joining jionm "mad money" tonight. we're back in two. hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. rock stars. please! do you know what it takes to be a rock star? i've trashed hotel rooms in 43 countries. i was on the road since i was 16. i've done my share of bad things.

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"a" shares, even after its major jump following last week's acquisition of silicon valley bank's assets. new price target, $12.06, they were prior in the 500 range. believed that silicon valley's assets can double tangible book by the end of the year let's bring in our mike santoli, talk about, are we going to see more calls like this it's a pretty dramatic move in targets. >> the market instantly revalued the bank higher. it was much more a measure of how good a deal they got on the acquisition and essentially how the fdic priced it to sell very difficult to extrapolate across other banks, but it does seem like once running the numbers of what book value can get to the assets weren't really the issue. you have some certainty about what you're likely to have there, and you make some assumptions about deposit loss, things like that it seems like it's in the ballpark of where the others are trading. the thing is, i was just looking, if you look at the

community banks' etf or the regional banks' etf, they're trading at banks tangible book value. not as cheap as they got obviously during covid but even before that in 2011, so you could say there's room, in a real panky market for those stocks to get even cheaper but i think they've built in a lot of not just book value, but growth expectations coming down. but, you know, a lot of noise in the numbers. zp >> i was just going to say, the kre is lagging again it's a group that's not bouncing so hard to tell whether -- we just talked to josh friedman of canyon if the fed raises again, these banks will face more problems going into money market funds and other places >> goldman's got a good piece about how much deposit costs will be going up, just consistently and yes, it would add to the pressure if, in fact, we did get another rate hike. so i think that's going to be a big issue. the question is, is it the right

time in the cycle to even be kind of getting a little more adventurous in valuing these stocks it's just a reminder that banks are opaque they are just these piles of money with a lot of accounting assumptions around them. and it seems like no hurry to buy them but if you get them cheap enough at some point, if you don't zrars disasters popping up from here >> two things, baird and a look at western alliance today, as they have down by double digits this morning, but they did update some disclosures for the fourth time since mid-march. nothing on balance, which is what we're looking for >> it's interesting, i don't know what you're trading off with a lot of these things day-to-day it is basically about rate examinations, especially in the case of something like a first republic, where it can just swing, because we just don't know it's a bit of an information vacuum there >> i still think also at some point, the regulators has to tell us what happens to uninsureded depositors if we

have another situation i know there are all of these implicit guarantees, but i don't know, is the fdic going to step in and do that for every single bank >> they're hoping they don't have to. and it's one of those things where it hasn't necessarily -- does it seem smart for the people to have rushed to get their money at this point? it's like, wow, it was a precaution maybe we didn't need to take it. for now, calm is your friend it's much more whether these companies can earn a reasonable return down the road, when their costs are going up, when they're trying to build liquidity and essentially allow capital to accumulate on their books. >> another research note that stood out to us i wanted to highlight, on tech, wolf outlining how to play the industry's so-called year of efficiency they pointed to the megacaps as having the best ability to cut back without hurting the bottom line pointed to incremental gains for uber, door dash, spot any, cutting in areas including stock-based compensation, marking, head count, feels like

this is why the market eyed some of these bigger market cap stocks as safe havens during this time. >> absolutely. >> meta is the obvious one and i would say meta is the only one where you've actually seen earnings estimates go up a lot in the last three or four months the question is, it's now got a premium multiple on raised earnings expectations. the interesting one to me would be alphabet and whether those numbers can really come up in a material way, based on what they're doing on the dos cost side and maybe things aren't as bad. that has been rebuilt with the outperformance of tech bigger picture, i think, take the point that these management companies are now feeling like they have years' worth of efficiencies they need to catch up on. i was actually taken by a thread yesterday by this tech software engineer, early microsoft employee, reminiscing about a 1993 memo that went out from bill gates at microsoft saying, it's time to be attentive to

costs and how decisive that was in setting the culture of the company, which was really never a high-frills culture, but something where it was just like, let's just remind everybody that there are shareholders here we have to worry about. >> was that part of a remembrance of the company's founding yesterday >> it might have been, but he was basically saying, this memo said, hey, look, t-shirts are a great team-building exercise, but we don't need a t-shirt for every building it's a great time capsule for an earlier stage of tech innovation >> mike, thank you up next, the world continues to take different approaches when it comes to monetary policy australia announcing a rate pause yesterday, but this morning, another big country had a jumbo interest rate increase details and the story abroad, next plus, the ai battle between alphabet and nvidia is heating up we're ckitth sryn o.ba wh atto i

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benefits. payroll. compliance. trinet. people matter. welcome back to "squawk on the street." i'm seema mody and here's your news update at this hour authorities in missouri are reporting multiple fatalities over a tornado that tore through the southern eastern part of the state this morning local police have not released an official death toll, only saying in a tweet that injuries and fatalities are confirmed this comes as more twisters are expected across the region two democratic senators are sending letters to 27 ceos, demanding responses on their company's compliance with labor laws democrats alex padilla of

california and john hickenlooper of colorado said they are concerned about labor exploitation of child migrants according to the labor department, there has been a 69% increase in the number of children working illegally and king charles iii's wife has been officially identified as queen camilla for the first time until now, she had been described as queen consort and buckingham palace used the new title on invitations for the monarch's may 6th coronation carl, back to you. >> seema, thank you very much. a couple hours into trading here let's get post-to-post with bob pisani and see what's moving, as we have some variation between different end indices. >> the s&p is faltering because we don't have goldilocks we need the data to slow down just enough to have the fed stop raising rates, but don't want it to slow down so much that we have a more serious recession. really tough to get goldilocks right, because we've had a string of economic releases that are a little weaker than the market had anticipated

you can see the effect this is having on the cyclical sectors john deere is a good example, down 6% last woke, and another 4% today, after having a great run last week. everyone in this group, ingersoll, rand, caterpillar, all the big global industrials are down 5, 6, 7% this week. another little disturbing development. mike was talking about the banks here and bear upping zion. comerica is down along with all the other regionals. it was down 11%. now 38 that's a 10% drop here so those are now tradieing belo their recent trading ranges they had last week. that's not a good technical sign the reason is dow is holding up, it has a lot of defensive names in it. all of pharmaceutical and consumer staple names. merck probably add 50 points to the dow jones industrial average this week. that's held up very well humana's up, lily's up, health care in general has been doing

very well. at the same time, i know people don't pay much attention to utilities, but they have very competitive yields now, compared to treasuries. so, remember, when the treasury yields were going down, utilities like first energy were dropping dramatically. they are now having a modest breakout most of these utilities are at the highest levels since early february and remember, sarah, they have very competitive yields. these are all 3.5 to 4%. and when you've got that environment with the yields dropping on treasury, suddenly they become a lot more compelling sarah, back to you >> bob, thank you. bob pisani european markets closing just moments ago after a muted session with stocks marginally higher overseas. but the story that we want to highlight again is again in the asia pac region with new zealand central bank stunning the market with another rate hike a double, in fact. and on that hawkish tone, the bank of england's chief economist saying that the bank of england may not be done either new zealand was a shocker. no economist expected 50 basis

point hike they all expected 25 and it stands in stark contrast to what australia did yesterday, which was pause to say, let's see how the data involves. they had similar inflation numbers and they're both high. new zealand is around 7% new zealand's economy is already shrinking. it shrunk last quarter, into negative but i think this speaks to maybe different philosophies and pain thresholds from central banks on inflation and on how hard it's going to hit the economy the view from new zealand is, whatever it takes. whatever it takes, the pain in the economy, we'll try to bring down inflation the kiwi, the new zealand dollar soared more than 1% on this news it's come down a lot from there since then but it's interesting as we ponder what the fed is going to do >> indeed. even australia has taken pains to say, look, even though we paused here after ten straight hikes, doesn't mean we're not going to go again. it's interesting to see the dxy holding in in the wake of what's

been a weaker dollar we have a new call for 2200 on gold today >> it's been the story of weak dollar, strong gold, maybe a little bit of a bounce today on that trade but the view is, if the fed is getting closer and closer to being done and the economy is looking weaker than we expected, which has been the whole story in the markets, it's a reason to sell the dollar against everybody else, especially when some of the european data has continued to show resiliency and they're seeing disinflation, which is a good sign for europe. >> five straight months of producer prices anyway, lower in europe coming up next, the fed has continued to reiterate the importance of taming inflation, but the travel industry is certainly a sore spot. airline prices up 20% year on year for more on where prices may go xtwel lko e ne, 'lta tthhead of frontier, in a moment. go. go green. go wind turbines. go gorgeous reliable grid. go emerson software. go science people. go breakthrough meds and safe science. go space age welds for super silent cars.

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>> 20% more expensive than a year ago, according to the■■ fos at hopper.x■ ñ■r■ lines are showing customers

trade up to moreñ■ premiumx■ products while hotel stays have broken to 300 a night. that is a 64% increase from 2022, led by qaui, which is averaging l■ç■$622 a night, and that's impact bumwdts asç■ well. trip w3■dviser, a new survey showing one third of customers will take+■k5ñr telling me last month that he's rat thelsecond half of t(■023. demand starting to slow when you look at the weekly hotel occupancy numbers falling in the last week to 65% vacationñ■ rental rates, which surged during the pandemic are anticipated to moderate q+ t(■e. it's worth noting in the month÷■ of t(■(■ebruary, prices rising , f@á■ month last year. carl let's dive deeper into travel. clear or cloudy skies ahead for airlines our next guest, frontier's ceo barry biffle sees some healthy

demands with macro head windsñ and staff shortages. frontierp■■■down about 7w■/5ei5q he jointuj today barry, thanks for the time listening to what seemañi■was saying about intentions, i i]me, isç■ñ9e■■of that getting u?#■ece in bookings or+■■■cancellations >> no, we'rer robust demand and volume is asx■ good asxd■it's ever been we're seeing the bookingñ■ stretch back out andw■ really robust demandfá for ñ■u5■■sñ i think we're looking at,q@■ou know, fares being up i]xd■0% ye over year, butp on a trend basil t(dk're not up that much in and so by the time you get to summer

fact, the laborfá force comest(■ back, gets a little loser in the quarters to come know, the labor forá pretty much back, and there's still a little bit of a pilot shortage, but we're seeing light at the endx■■■of the tunnel q■t, the big constraint in capacity,c and it's goi)■o be a multi-year thing through pretty much the end of thet(■decade isn the aircraft supply.q■ and you just can't -- if you want to go buy an ç■a-321 nknee, you can't get one for the next you can't get one for the next six or seven years u■q!qealityr capacity was-■■■d■lost during ta shutdown with boeing all of those aircraft that didn't get made has caused a constraint.ko■ç■q■l■ so we'll deal with that for several years now. >> i'm wonderingx■ how the inflation inñ■ airfares, which u just talked about is impacting you specifically asxd■a discount airline. doq■ people trade down during times like these, because everything isjfe1 more expensive

>> we've seen some trade down, and thelpçó■factst(■show, like a walmart,ñ■ frontier,zgh■] and cs likeú■ wie beneficiaries. we're also seeing incomes much higher than t■pre-pandemic and we're seeingx■ a lot morer people being able to afford rp"f r■ what's kind of causing the surge inx■oç demand, especially when you couple itjf with the work from home phenomenon so there's just a lot moret■j■j■ leisure demand than we had pre-pandemic, with less supply that's why you're going to see higher fares >> meantime. we have seenç■t■r examples the lass■ few weeksl■ñ■ where jetblue, t(■merican, trimming service in new york markets. i guess largely because of j staffing is that something you've had to do because there'? people to go around? >> no, so, i think you're talking about theé@■pcairtraffic controllp challenges we're not thate■c■ impacted by . we haven't made anyxd■major issues, in fact, we've been doing everything we can to ensure we're kind ofi■ navigati around the shortages

in fact, in q1, we're one of the few carriers that is above 19 and 'dqrexd■actually 40% larger than we were in 2019 we continue to grow and continue to do the things that we've got to do to navigate the laborko■f■ shortages. >> i haven't talked to you in a while, barry do youñ■ expect the jetblueñr■mr with spiritñi■to actually go through? i know you hadi■÷■ wanted to dot merger and they are now getting some challenges from the government does that actually happen, and if so,ñ■ how do you plan for itc >>e■ we believe it +tq's. and■3■what we're doing is we're planning to do everything we can to be the nation's elcc at that point. ju low fares. we're already that, but we thinr largest competitors would actuallyleave the marketplace.q so -- >> then the onm[ car >> we'll bei] one of the few and the only nationwide? >> my otherjfok ques,i■■is on jk fees, because we know the biden administration wants to crac down on that and wantse■ to put

somec■ legislation forward you charge for a lot of stuff,xc including i f■know, it got a lot we bonuses that your staff get when uju■r-ed bags.f■ how are youe1 affected if they really start to crack down on junk fees. does that change your financial position >> i think there's a lot ofq hubbub, butw3■the reality is the consumers look at the total price, and in the total price, consumers pay the most with frontier z■p .■■■rue. we have a lote1 of options and e government is concerned about family seating we're one of the few carriers that has a family seating program. sox■l■ we offert(■a lot ofç■ op but look at the total price and i think you'llñ■ find thati■ consumers win with our model andúuqeko■ñ■ó■doj in theirç■+■■e against jetblue and spirit, they win out the merits of our business model i think it's interesting, we have one side of the government complaining aboutok us and the q■her that heralds the low fares and what it doesr

and what it does to bre;t■1 down costs. >> speaking of costs, maybe next time if oil holds up here, we■id talk about the impact of oil and jet fuel costs on the industry later on bar barry, appreciate it good to see you. shot at5a■f■ nvidia as it lookso get ahead in the ai ñ■race we'll get thate■ story after the break with nvidia shares down more than t■2% biggest laggard in that sector right now. “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect. terrier-iffic i labra-dore you round of a-paws at&t 5g is fast, reliable and secure for your business.

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the focus of today's "tech check" with dee. >> it is chatgpt versus microsoft versus google, what drives the product, the most powerful chips and that leads us to google versus nvidia. generative ai are becoming so big they can't be stored on a single chip. they have to be split across thousands of chips which must then work together creating a supercomputer. now google has published a scientific paper saying that its supercomputer is faster and more efficient than comparable systems from nvidia. to simplify further, guys, if microsoft ceo nadella said he wanted to make it dance with cha chatgpt, you might think this is sundar pichai know they're

dancing all right but they don't need a partner more of big tech is designing their own chips like apple in this case google's own in-house chip, the processing unit, is being used for 90% of its work on ai training and google says those chips can be strung together to create better generative ai. wall street is somewhat skresk skeptical, calling the stock movement today an overreaction you can see nvidia down about 3% we are unlikely, though, to see an apple/intel level break anytime soon these are still close partners, nvidia and google, that is the long-term risk to nvidia's high valuation, others are making their own custom chips. this is sort of playing out on the compute level. >> right so apple is doing it who else is a potential threat

here >> amazon is doing it as well. they would move away -- apple is doing it not just displacing intel but worries about qualcomm for modem chips and it goes down and down the stack but in data centers where amazon is working and, of course, there's really one company that helps these companies, big tech, that is, make their own chips and design them in house and that is arm and why that is expected to be an exciting ipo. risk five is open source but arm is the one all the big tech companies have been leaning on >> meanwhile we talk about head count reduction in big tech but they can't afford to cut too deep because there are so many innovations. >> cut everywhere except for ai, cut metaverse and everywhere else i feel like google is trying so hard to convince people on its ai strategy. is that just the perception? >> that's definitely the perception because it got off on

such the wrong foot. microsoft beat them to it. they really had that definitive chatbot, generative ai moment and it does, i agree with you, feels like google has been trying to make up for that in the preceding weeks and months >> early days still, dee thanks the street is buzzing about aticago's new mayor and what th may mean for big business when we come back.

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wall street buzzing today about chicago's new mayor and his plans to raise taxes on major corporations to boost the city's revenue robert frank has the story i saw this in a number of research notes today, robert, because of the tax plan. >> reporter: sara, there are so many of them that's what makes it interesting. chicago's new mayor proposing $800 million in new taxes on busi businesses saying he wants a $4 per employee tax on companies that have at least half their operations in chicago. he's proposing a securities and speculation tax. that's $1 to $2 per securities trading contract that would, of

course, impact the cme there in chicago. there is a jet fuel tax on airlines, raise about $100 million. a new hotel tax, and he's proposing a new mansion tax on high-end real estate sales some say this will cause a lot more companies to leave chicago. you've already had boeing announcing last year it's moving from chicago to virginia caterpillar also leading and citadel planning to move to miami. chicago is looking at a budget gap of $128 million for 2023 a lot of that with underfunded is the smallest since 2019 federal aid starts to run out and they haven't had the employment growth a lot of other cities have had and they have a huge crime problem they're trying to solve. >> yes, right. i'm wondering who is left to pay these, boeing, caterpillar, citadel, tyson foods i think

moving headquarters from chicago. don't the politicians realize this turns business away >> his view is if you invest in the city it will be safer, cleaner and better and will attract more business. that's yet to be seen as the theory whether that works. >> public safety behind citadel's move robert, appreciate that very much robert frank let's get to post 9 and "the half." all right, carl, thank you very much. welcome to "the halftime report." i'm scott wapner the weakening economy as several key reads suggest growth continues to slow. yields dropping, recession fears rising, all of this yet another fed member says interest rates still need to go higher for longer we'll debate and discuss this hour joining me bryn talkington, joe terranova, kari firestone here at post 9. let's check the markets. it's been a health care kind of day, utilities as well yields are very big story today.