thank you very much. mr. weiss? >> bunge, bg, the shortage is in oil and i think they'll continue to do well this quarter. >> people do need to eat and they're going to mcdonald's and the better place is yum china. my final trade >> "the exchange" begins right now. ♪ ♪ hi, everybody. welcome to "the exchange." i'm kelly evans. here's what's ahead. another quarter-point rate hike after the decent march jobs report the street is ratcheting up the likelihood of a rate hike in another week's time, but economists say not so fast where they think rates should go next plus warnings signs for the upcoming earnings season and we'll dig into the biggest pain points as well as unexpected bright spots and truly, they might surprise you and china flexing its military muscle after the taiwanese president traveled stateside and we'll have the latest developments and

theu.s. response as china remains the only major economy whose money supply isn't contracting right now. let's get a look at today's market action and we saw the dow turning positive in the end of the last hour. the s&p is still down a quarter percent just under 4100 and it's a familiar refrain and the nasdaq composite is down about half a percent and let's dig in there in just a moment as it is the underperformer and you can see the chips which samsung will cut memory chip production in an effort to boost prices and micron up 8% same for western digital adding 1% and micron the best performer of the entire space with the rebound. let's move on to shares of wd-40. it's down despite a sizeable earnings pace late last week and it is on pace since last october and the strong results are being overshadowed by weaker full-year guidance shares of wd-40 are down 5.5%.

citi putting out a note saying they see a 65% rate hike at the next meeting and especially if we have a strong cpi print let's get details from our own steve liesman. hi, steve. >> hey, kelly, good afternoon. that view by citi is close to the view of the market which is look at the data on friday on jobs and banking and the data coming this weekend leaned toward a fed hike. fed funds futures trading with a 74% chance of a hike next month and a 26% chance of no change and it had been closer to 50/50 before banking data and the payroll growth was the lowest since the pandemic, but it's still double the level to find jobs and the unemployment rate did tick down even with 800,000+ coming into the workforce in the past two months and the job market still looks to be pretty strong bank deposits and they've seen massive outflows and the failure of silicon valley bank and

they've showed they've stabilized and though bank lending did fall sharply and here's the commercial and industrial loans from banks owing $60 billion in the past two weeks and again, weaker and not necessarily weak fed officials they mostly said they don't expect the credit crunch to be severe enough to warrant ending rate hikes, but today the new york fed reported that 58% of respondents to their survey of consumer expectation found that credit is hard or very hard to get the high for the series and it goes back to 2013 so it's two and a half times the average response and average americans, kelly already seem to be feeling a pretty severe credit crunch and the question is does that show up in inflation >> wait, steve just to be clear they just reported the tightest conditions since 2013 wow. >> for availability, i'll double-check, it's current and future, yeah, current and future expectations for credit and one is the credit availability now and that's the tightest it's

been and the hardest to get and in terms of expectations for the year ahead, hardest to get >> really remarkable steve, stay with us. >> my next guest is convinced another rate hike is the way to go, and apollo global management and chief investment officer and a cnbc contributor welcome to all of you. peter, it's a new set. this is like a cool, new look. i like it. i appreciate you joining me on set today. on a grim and dire note why don't you think it would be the way to go. i was chuckling, come on, people, seriously, after all that's happened do you think the fed should keep hiking >> if they're using pattthe pay number, it happened a few days after silicon valley bank went down and ahead of that weekend when we didn't know what would happen that monday and we have to assume that things changed since that, and if you look at the loan data that steve referenced things have changed

commercial and industrial loans outstanding are the lowest level since september of last year commercial real estate loans outstanding fell by the most in two weeks since 2011 >> wow so there has been an immediate credit response to the downturn of those banks and it has metastasized to other parts of the banking system so wouldn't it be more prudent if you're the fed to say, you know what? maybe i should just take a pause and see how this plays out there's always another meeting that i can hike interest rates at why does it have to be this one so soon after what is really a bank earthquake that took down those bank, but obviously has broader implications >> what's your response when things aren't too bad and we have to watch out for that inflation. even though it's an incredibly lagging report, but what's your take >> the whole issue is the original banks and here we talk

about the definition of the fed data is number one to 25 are the large banks and 26 are the small banks and those regional or small banks make up roughly 40% of all lending, so the problem is when you now have a situation in the regional banks when you're looking at higher funding costs and potentially more scrutiny and also potentially significant declines not only in the liquid assets and the declines potentially coming in the illiquid assets and we saw last week there was a survey from the dallas fed which was done after silicon valley bank from the 21st of march to the 29th of march and that survey of 71 banks for texas it did show the fed a substantial rollover in volumes that crossed all types of lending and the conclusion, kelly, to your question is there's still a lot of uncertainty and the credit crunch takes time and we are going to go through a period where basically regional banks have to reorganize their balance

sheets and then runs the risk of a sharper slowdown in the economy. >> maybe, steve, if i would put it like this, we've already had the steepest, fastest rate hikes in history and now we've had that accelerated over the past month by the mini credit crunch, let's call it and why can't the fed take a wait-and-see approach here some of these are leading indicators and things like lending standards and loan availability and they can play out over two, three, maybe four quarters' time >> i think they hold them in high regard and have deep respect for their points of view, what i'm about to say now i'm simply taking the other side, perhaps the way somebody from the fed may see it here, and i'll throw out a up kell of factoids here. bullard last week pointed out that banks represent only 20% of intermediation in the economy, and so his point was that he did not see the banking credit crunch creating a rippel and wave in the broader economy when

it came through a credit crunch. the other aspect of it is they're looking down the pike today or down the throat this week of a core cpi number that if consensus right is going to be still going up. headline coming down, but the expectation is for the inflation, the core inflation to rise by a tenths and increase h year over year wait and what i've heard them say so far, and i ain't saying it's right. what i've heard them say so far is that the inflation problem remains the bigger concern and they will factor in the credit crunch problem when they see the whites of the eyes of a credit crunch >> let me turn to peter who i think of as one of the biggest hawks on inflation, and that's why i find your point of view so interesting here to take more seriously the economic dynamics you're describing. when steve says core inflation

will tick up one-tenth, what do you say in response to that? why do they say we better make sure to tamp that out. >> first of all, there's nothing wrong with waiting a meeting because that doesn't mean the fight is over. the core cpi is being elevated by the acceleration in service inflation because of rents, but we know rent growth has slowed dramatically, so when we're looking out over the next three to six months the service side of that inflation print is going to slow sharply. goods prices may have bottomed i think goods prices can actually pick up here. so all i'm saying is to maybe take a step back and don't end your inflation fight and the other thing to steve's point when i spoke about bullard saying it's only about 20% it reminded me about bernanke saying subprime and housing is very contained it is going up everywhere. look at vc funding and look at the level of ipos and you can be sure that every non-bank lender

is tightening standards and raising what they're charging their borrowers. >> i'll give you the final word here >> if we take a step back and think about how long did it take when the housing bubble burst before the economy came back remember, residential investment in the construction of homes dropped 50% after the 2008 housing bubble so if we're not looking at a situation where commercial real estate needs to adjust, in other words, we need to go over several years where we will no longer build sky scrapers in manhattan, we have a gdp of a percentage point over the next several years. if it took time to clean up after the residential bubble in 2006, 2007 and 2008 it will take time for the gdp growth to grow that we're sitting in at the moment. >> as everyone kind of follows along in this debate, if citi says 65% chance of a height we have at least five speakers on tap for this week, where is the

market right now is it 50/50? what is the consensus on the next meeting and what kind of language cues should we be on the alert for in terms of what we hear from officials this week >> so it's 74 to 7130 if you want to call it that if they have a hike. >> wow >> i think, you know, it's been pointed out that powell last time had a much more sort of ambivalent view about the next hike he was sort of leaning on the credit crunch, and i think one thing we haven't talked about, i know we're running out of time, is the minutes from the meeting. i think we'll get a lot of guidance from how close a call was it last month to understand how close a call it will be next month and that will be the key here were they on the fence and just kind of decided to do one more and then maybe take peter's idea of a wait-and-see attitude so i'll be looking closely at that in terms of the minutes of

the meeting and whether or not there were different camps that were more or less concerned over the possibility of a credit crunch as much as i agree about the idea of being cautious, the credit crunch issue has to influence the fed because we have the one-year expectation today on the survey of consumer expect eggs expectation and it will be up half a point whatever the credit crunch does, it has to manage itself in the inflation channel. >> so i liked peter's breakdown of where he thinks the inflation trend is going can you give us the same sense where do you think cpi is trending in the next couple of months' time >> the very important answer to that question is first, when we are sitting at home ordering stuff online, goods prices went up and in 2022, the theme of

2023 is that service prices are going to normalize wooe alrwe're already seeing, t sub component prices paid in ism services has trended down strongly and that's the leading indicator that both are headline inflation and it's also a leading indicator for average childhood earnings and there is some strong downward trend in inflation and that should mean that by the end of this year the fed should be looking at inflation that's closer to the 2% target that has been for several years. >> we have to leave it there did that go up after friday's jobs report or is that pretty consistent it's just much higher than i would have thought >> it had been 50/50, and i think the banking data gave the market the all-clear to price that in because it looks like there's been some slowing in the flow of deposits out of the banking system so -- >> right >> i think it that had continued a pace it would have been a cautionary light for the market.

>> gentlemen, thank you all very, very much. our steve liesman, torsin shock and peter brookfar >> including a 2% drop after they announced price cuts and they come about a week after new rules for ev tax credits go into effect let's turn to phil lebeau. does that explain their move here >> that's part of it, kelly. the other part is that demand has been waning especially for the two most popular models. the model y which is the best-selling electric vehicle in the country and the model 3. so here are the new base prices for the model y and the model 3. by the way, the base price for the model y is an all-new model comes under $50,000. the model 3 now drops down another thousand dollars to $49,990. all of them said the same thing,

big surprise and we wouldn't be surprised if there were more the wait times have fallen, but at what price for tesla shareholders the price being gross auto margins. will they fall under 20% the expectation is that for the first quarter they'll come in at 20.1% or 20.5% i should say and we should see it before they report their q1 results and tesla dominates the u.s. market selling two out of every three electric vehicles in this country and the market share is eroding as many expected as they see more electric vehicles come into the market. this way it was up 75% in the first quarter of last year the standard rage model y getting back to whether or not the ev tax credit will have an impact and that is not expected to qualify for the full $7400 because the cells come from china that are put into those standard range model 3s. so what you could see when these

rules are coming out next week is some teslas get the 7500 and the adjustment in the price is likely tesla's way to saying for potential customers you don't get the full 7500 and the price comes down relative to where it was. >> so i also was skimming whitney tillson's note, two of my friends hate their new teslas and among the reasons is they didn't like the yoke steering wheels and they don't like the buttons for the functionality and the steering wheel is horrible and the camera disappears and the bumper took four months to replace one got rid of a tesla and replaced it with a bmwi7 is it possible that tesla has not yet found the car for everyone the demand has been incredible and its supply -- it will be hard for any upstart to compete. it's eaven hard for ford and gm to compete and they need to

pivot to a price point and perhaps with features that could be adopted in a are have, very broad way, and i wonder if the market is a little disappointed that they have yet to kind of do that >> two things here two points that you're making here onedeals with the feature of the car we'll talk about that in just a bit and with regard to the price point, tesla is expected at some point whether it comes innate 25, '26, '27 some called it a model 2 and that's just a price that's come in there in the $30,000 to $35,000 range something to make people say wow, i'm ready to buy this and by the time that comes down we'll see lower priced offerings from other automakers and with regard to the functionality and you mentioned whitney tillson's comments i can point to as many people who love different things about the tesla. whether it's the yoke. whether it's the ipad that they use for controlling all of the functionality within the car,

but it's a matter of style and taste. there may be people out there saying you know what i want the full instrument cluster. i do not want to have the irk pad in the center and that it's too spartan inside the tesla so far their game plan and that style has worked you can't deny that. >> absolutely. >> and that's why they have the two best selling evs in this country. >> quick final comment on ford and gm and the rest of the automakers especially now with the administration pushing on fuel efficiency and all the rest of them. is this making their next five to eight years that much more expensive and is the market frustrated by that >> oh, it's going to be much more expensive and we'll get the full rules that's expected on wednesday, kelly, when we get the new epa guidelines which is expected to dramatically push the auto industry toward sales of evs by 2032 we're at 7% right now, kelly to go from 7% up to 66, 68%,

there will be a lot of pain and a lot of cost involved. >> tesla still up since february and still up 60% this year phil, we'll leave it there thank you, sir phil lebeau reporting and the post-pandemic pc slump for all major computermakers last quarter including apple. how should tim cook respond? we'll discuss that next, plus shares of top golf calloway after jon rahm's come from behind victory after the week end's masters tournament and big spending on golf may be coming under pressure and we've got the details. as we head to break let's take a quick look at markets with stocks across the board at session highs and the nasdaq is down 40. "the exchange" is back after ♪ ♪ >> this is "the exchange" on cnbc

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>> welcome back to "the exchange." not even apple is immune to slowing pc demand. out of the five biggest companies apple posted the biggest decline in q1 shipments. they were down 41% year on year, but ceo tim cook may not be too bothered as he reportedly sets his sights on virtual reality and they have the company's reputation as an innovator in a

post-steve ojobs world today it's moerth worth more than double that my next guest sat down with cook for how he's running the biggest company in the world zack barrett, welcome to you what was the biggest surprise with spending time with tim cook. >> biggest surprise? >> or does this man have any surprises? >> well, i think, yes, that is the surprise i think the line on him sometimes is that he is a very buttoned-up corporate executive with no surprises to give and the thing about him in person is that he's actually a very lively, very charismatic southern gentleman who you kind of get why he's so successful running this company because he's smart, very entertaining to be around, honestly. >> i always heard he had a little bit of an edge perhaps in

meetings and with subordinates and that kind of thing i don't know if that's kind of dulled or fallen away over the years as his results have spoken for themes and he's widely reported that he's had a biggest second act in corporate history. >> i think he is a demanding person, and you'd have to be in that job, and it's actually one of the reasons why he's interesting to talk to, because if you're imprecise or a little lazy or sloppy about something he'll notice that, and i think as far as working for him, he and i talked about this, he's going to ask you questions and test how well you understand something and if you understand it, great. if you don't, he's going to keep asking more questions and that might be uncomfortable for you >> steve, i turn to you. when i hear the company is betting on this headset and at some point this headset will be very important, but are not we all realizing that maybe the metaverse isn't going to be as

big of a universe and a total addressable market as we previously thought and that ai is the game changer here do they risk getting meta'ed >> they sure hope they're not going to get meta'ed >> what the headset might do, and we might learn in early june, look, more interesting than what this thing can do, we understand what these headsets can did. how do they pitch it how do they market it? what meta is doing they've slash the price and they failed to show a use case and there's not a big developer system out of there so apple has s work cut out for it and they have to get on stage and say you've seen the terrible headsets before, and we're all confused by it and here's how apple sees it and here's tim -- we're talking about tim, here's what tim thinks and he's told zach augmented reality and he's been ringing that bell for five or six years and how important augmented reality is >> years ago they gave people

the tools they needed to do a.r. the phone. so they have the foundational read they meta doesn't have and that other tech companies just don't have that just by the scale of how many iphones are out there so they can take that foundation, build on it from there, but again, what's the marketing pitch? who will buy this? why should they buy it and how is it better than what we're using? the company thinks will be the product or the kind of technology innovation that gets them to 3 trillion if you're ever going to get there. >> get back there. >> let me emphasize. >> they got there once already one is, you know, tim was obviously circumspect. i did ask, this has not succeeded in the market efore, what makes you think that apple could be different and of course, the point that he made is very much a part of apple's

self-image is apple routinely comes in the market and does a product better than what other people are doing i think in that sense you can count on apple, if they do this, confident that they're going to do it in a way that is perhaps more successful than some of their competitors. yes, as steve said, tim is very interested in ar he's very interested in the possibilities of overlaying the -- these are rules with the real world and there's the delivery system for that, but i think they have a lot of clarity about this has a lot of potential for creative collaboration. this has a lot of potential for the kind of day you have now, but better and more effective and more creative and so in that sense, i think that ar dream is still very alive, whether or not the headset that may or may not exist effectively delivers that is a different question. >> before we let you go, zach. how did tim cook end up on the cover of "gq". >> he was at a party in new york

wearing a blue tux with donald glover and it was a whole thing. >> can't confirm he looked great. >> yeah, you know, this has been a long time coming i've interviewed tim before and he and the editor in chief have spoken before and we had this issue and these createsivity awards that steve referenced and we had a lovely gala on thursday and we were thinking about what epitomizes modern creativity, and i think there are some intuitive ones like donald glover and maybe some not as intuitive as tim being coup, but if you think about creativity in the last 20, 30 years, apple has played a huge, huge role in every creative lab in some ways tim has made a lot of sense with that. >> i like knowing what makes him say yes, i'd like to be known for that thank for joining us to talk about it we appreciate. >> zach baron, steve, also a

pleasure we're headed into what's expected to be the worst earnings season since the pandemic first hit with expectations of i 5% to 7% drop and what are the names with the durable earnings power that are worth paying for one portfolio manager brings us her best under the radar ideas china wraps up a third day of military exercises around taiwan with more expected in the coming weeks. we've got that with the latest pulse check on china's economy and as we head to break, take a look at the dow heat map with caterpillar leading the way after what's been a tough start to the year and procter & gamble, apple, the worst-performing stock down almost 2% today. we're back after this.

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welcome back to the exchange the s&p joining the dow, while the nasdaq remains down by a quarter of 1% today. we'll look at movers this hour, as well. we'll talk about the this potential deal where pioneer shares are up 6% on this news or rumor that it could merge with exxonmobil the wall street journal reporting that exxon has held informal talks to acquire pioneer which is currently worth north of $49 billion exxon shares notably down half a percent on this report, as well. elsewhere, the movie theaters are getting a boost from the super mario brothers smashing movie debut this weekend and cinemark and imax, up 3% and the movie hit number one bothed in u.s. and worldwide and it took in $377 million and that's the biggest opening for an animated title. i saw, cast 5 below because

super mario's invents or is flying off the shelves we have earnings on deck, but there's troubling data when it comes to their balance sheet, u.s. bank lending dropped by more than $100 billion in the last two weeks of march and it's the biggest slump on record and they dumped $800 million of mortgage-backed securities as they try to raise funds and reduce risk and this according to the st. louis fed and that's interfering with the ability to pass on availability to homebuyers mortgage rates have fallen less. they're still hovering around 6.5% let's get to tyler matheson for a cnbc news update tyler? >> all right the bumpiness in banking continues. thanks, kelly. here's your cnbc news at this hour south korea responding on reports that it is spying on its asian ally the pentagon documents leaked over the weekend south korea demands that the u.s. take appropriate earn inures once the investigation into the leak concludes and this

according to a south korean official. a ship carrying around 400 migrants is adrift in the mediterranean sea after the captain abandoned the vessel in waters between malta and italy the charity organizations says the ship is at risk of capsizing and running low on fuel. malta had ordered two merchant ships nearby to not conduct rescues, but rather just to supply additional fuel and food. and the fbi is warning against using public phone charging stations. officials say these chargers can be subject to something called juice jacking which is when bad actors can use public charges to infect phones and devices with malware. the fbi says people should stick with their own usb cables and charging plugs back to you, kelly >> okay. well, i guess that was a waste of money, then >> yeah. >> tyler, i'll see you soon. >> it's earnings season and the results are not expected to be

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>> welcome back to "the exchange." earnings season unofficially kicks off later this week with the big banks reporting and while the street doesn't agree on the exact figures when they talk about the overall season they can agree it will be pretty bad. goldman thinks earnings will fall 7% year on year the official tally is for a 5.5% drop some of the worst performers with how we got here include materials whose earnings expect to be down 23% in 2022 healthcare down 19% and tech down about 14%, as well. most of the pain there, by the way, in hardware and semiconductors on the flip side in terms of the positives, consumer discretionary and this one is expected to have a growth rate of more than 35% also the industrials expected to be up and energy within an 11-point gain. the financials are only other sector expected to see positive growth and speaking of financials this is the first earnings season since we had

sector reclassifications last month. one of the tech sectors was dissolved and moving paypal into the financial. adp and paychex has moved into the industrials and dollar tree were moved and two consumer staples from discretionary which kind of makes since if you think about it given the pressure earnings my next guest says it is all the more important to find earnings power. joining me is julie beale and cnbc contributor do we call this an earnings recession? >> i think it's going to be pretty mixed it really depends on the type of businesses you have. you can see some places in consumer discretionary doing well and you can see some places in tech that are actually doing okay some of the software vendors that have strong, sticky, recurring revenue. they're going to be okay, but if you think about certain types of businesses particularly in financials and i'm not just talking about your smaller, but i think all of the way up and down, it's going to be really

challenging, and i think everyone will take a much deeper look of what's happening in term of their credit quality. >> that reminds me of one of the areas you're looking for opportunity and correct me if i'm wrong, providing tech solutions for financials, am i right? >> they serve the banks. if i think of a company like jack henry, it's a sleepy software business that provides back office software to small and mid-cap banks. you look at their financials through the great recession, it doesn't even look like they serve financials and those are the earnings that they're being looking for because they tend to perform in the cycle. >> you think that one, as well >> it's interesting, right and they have this core business that really has among the highest quality principles, right? people have to give them data and they have to pay for the data back. it's a great business model and they have diversified away from

that and now they're refocusing on the core business and that's a real improvement in the financials for them. >> as everyone races to identify the next big platform winners in ai is that you're not racing to do that. why not? >> you know, if you think about chatgpt, my inbox is bombarded with expert calls and what's the latest of chatgpt and we were not able to predict this technology we don't know. did you really think that the first wave of ai was going to be making new pictures and new art and new design no, you wouldn't think that this would be the health care applications are interesting and when you have this nascent technology you really want deep pockets and resources to exploit it. a business like google is better positioned with the whiz bang start-up >> a lot of people are going for the sleepy factor that you're describing yes, it's had a good five or

six-day stretch here, but the earnings will be down and the margins will be down and there's post-covid weirdness to work out, still what would you say about that? >> the thing about health care that makes it tricky is exacexactly as you say the covid weirdness makes it hard to guess how,es businessesr really doing and fda approvals and patents rolling off and it's the same idea with financials and you like businesses that are serving healthcare and ones that provide, you know, the glass stoppers and tubes like a west pharmaceuticals where they benefit from a strong pipeline of drug development, but they're not dependent on the fda for individual approval and there's primary risk >> there are two thoughts about the market so far this year and the nasdaq's up 16% since jan 1, and half the room goes, see? there's no recession or it's priced in or the stock market is telling you that, and in other words, you should chase this and the other half of the room goes, this is a headfake and stay to

the sidelines and don't get sucked in. which camp are you in? >> it's one of those things where you're trying to predict the complexity of the u.s. economy and frankly, i can't even predict what my 5-year-old will want in his easter eggs, right? i can't even get that right and he's only slightly less complex than the u.s. economy. if there's anything i've really learned in the last two or three years is it's hard to be able to predict these businesses and very hard to know how the economy will respond to exogenous shocks like major interest rate increases, for example. so for us, we're really trying to find these durable businesses because we know that they can perform well in good times and they tend to do better even when we are in a recessionary environment. >> does that leave you steering clear of energy and materials of things highly geared to commodities or is it the picks and shovels approach >> yeah. i think that's right it's really hard to find businesses in energy in particular where it's a differentiated business and they're not super sensitive to commodity pricing and

fluctuation. for us, earnings variability makes a business very hard to run. it makes the stock very hard to price and so we'd like a more steady eddie kind of business and it's hard to find those. >> julie, thank for your time today. julie biel, cane anderson. tensions with china are ratcheting up after the taiwanese president's trip to the states and they increase military drills around taiwan ndd the u.s. has respoed we have the latest live from beijing after this and when i switched, i got to choose the phone i wanted. for free. not bragging. (cecily) you're bragging. (neighbor) oh, he's bragging. (seth) who, me? never. oh, excuse me. hello, your royal highness, sir... (cecily) okay, that's a brag. (seth) hey, mom. i gotta call you back. (vo) switch and choose the phone you want, like the incredible iphone 14, on us. (cecily) on the network worth bragging about. (vo) verizon

dad, we got this. we got this. we got this. we got this. life is for living. we got this. let's partner for all of it. edward jones

welcome back china has declared its military ready to fight after completing three days of exercises around taiwan after the taiwanese president with speaker mccarthy in the u.s. and our eunice yooun is in beijing and with the u.s. response hi, eunice taiwan has responded tonight to beijing saying that it will

never relax its efforts to strengthen its combat readiness. over the past three days the chinese military has been simulating simulating blockade as well as precision strikes and the shang-dong has taken part for the first time despite intense drills many people here are talking about how the action appears to be less aggressive than what beijing did when a former house speaker nancy pelosi visited taiwan last summer the belief is that beijing wants to appear stern and tough on taiwan while at the same time playing up its role as an international peacemaker in in fact, there were several foreign dignitaries last week and the drills took place only after all of them left the u.s. has said that it's monitoring the situation, but perhaps in a sign of how tense

the situation really is the u.s. has dispatched a destroyer to the south china sea in waters that the chinese claim are near islands which the chinese claim as their own and the chinese military has accused now the u.s. of what they describe as illegally trespassing chinese waters and they say that their troops are on high alert >> eunice, we were struck by the comments by the french president macron who seemed to imply that europe couldn't win on ukraine and couldn't win on taiwan and joining the u.s. if it came to that point i'm curious if that's already being played up there? >> oh, it's definitely being played up here on the state media. it's been talking very much about how the french and the chinese have so much in common there really has been an effort to talk about how important the relationship is with europe. so it hasn't been lost on the

chinese what macron has said and his -- what appears to be an affinity, from their perspective, to the chinese. >> eunice youn his first masters. but can callaway withstand a pullback in big ticket spending on golf? we will ask matt boss of jpmorgan that next i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. life is for living. let's partner for all of it. i'm so glad we did this. edward jones

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welcome back to "the exchange." jon rahm wasn't the only big winner at this year's masters tournament shares of top golf callaway, that's our mystery chart, and rahm's trusted brand, by the way. they're on pace for their best day since january. up nearly 4% and one analyst is betting the brand will have a stellar second half this year even if big ticket spending starts to slow on golf. joining me now is matthew boss, leisure analyst at jpmorgan. matt, welcome. appreciate you being here. >> absolutely. >> by the way, does it ever pay off to jump in on a stock like this the day after it always feels like this is a move you want to fade. or maybe it does build brand equity over time i don't know >> look, i think right now with the golf industry you have the macro and the micro. so on the macro, look,

participation is up 20%. that's -- >> points, right >> versus pre-pandemic yes. so if you think about the participation in the sport and what's leading it is actually off course, which is top golf, and that is the top golf callaway combination that you have the stock trading three turns below pre-pandemic and in my opinion this sport is in a better place coming out of this pandemic than where we were before >> even some friends of mine, a college friend in retail are launching a female golf apparel brand because they say it's gotten so popular now it needs to kind of catch up and be be lululemoned, so to speak how sustainable is this? even in the long run if people are golfing more than they were pre-pandemic it starts to look like pc demand is is down, all the covid bubble stuff is unwinding. at some point won't golf be part of that? >> i think what you have to focus on is experiential and i think the other thing right now that's a big focus for us is health and wellness outdoor and really active participation. and that's why i think that the

top golf callaway combination has that across our coverage we also in leisure cover bowlero. i think that's a real trend tied to a lot of mom and pop bowling alleys across the country. we cover brunswick on the boating side. i think that industry also comes out. and larger picture we have nike and lululemon, which we've talked about on the show before, that i think really play into that casual trend. >> i almost wonder if the pandemic breathed new life into some of these brands that were aging and maybe needed that. but do you still see -- when i was looking at some of your notes on this it does look like your surveys are picking up in moderation maybe big ticket spending on golf a natural unwind after a heavy spending cycle >> you have some cross-currents that i would say for the front half of '23 are absolutely relevant from some of the store work that we've done you have apparel overhang right now. now, part of that is you have disruptive brands. you have the dunning brand with some new performance fabrications you have different demographics out there that are really

gaining steam. east side golf, i would say. and you see a number of different brands that really were on scene down at the masters last week. we were actually on site i'll tell you, just the difference in some of the experiential and really the excitement around the overall sport. but i also think you have the replacement cycle where you do have new innovation out there. the paradigm by callaway some new irons on the way in the back half of the year from titleist and because of that i think that's where the large ticket macro does play in as well >> one more golf-specific question if you will you're seeing field work pointing to 15% to 35% discounts on some of these drivers and woods and hybrids and iron and that's across all major brands so what is that about and is there going to be a knock-on effect for the big box retailers that carry these things? >> i think it's the same as what question see across our larger picture apparel and retail landscape, which is innovation, differentiation and really those

who are spending to drive that are going to win and i think, again, tying back to the macro, which to me plays into the participation in this sport, which i think is stronger on the way out, i think you do have a lull here that's taking place near term. part of that is the overall consumer and some of the inflationary pressure that's on them and some of it is the innovation that i think is right around the corner and i think you're seeing it with paradigm, which was the choice of jon rahm here in the masters. and i think you're seeing some innovation from a number of different brands >> you're overweight on callaway and topgolf callaway so i guess finally give us, then, going into earnings season, i know we're still maybe a month out from many of the retailers, but what is the feeling on the consumer right now? i see data on the one hand they're stretched. in ten seconds, if you could >> so we're coming off our conference last week we had 20-plus companies i think the consumer is stable i think you want value and convenience. that for us is off pricers and dollar stores. and then i would stick with best

in class brands. and that's where i would say nike, lulu, callaway, topgolf i think fit that bill. >> matt, thanks for joining me really appreciate it >> great to be back. >> was it fun last week? >> it was great. >> how could it not be be? matt boss from jpmorgan. that does it for "the exchange." for more thoughts on the market economy and more sign up in one easy step at cnbc.com/newsletters scan the qr code on your screen. "power lunch" is up after the break. tyler's over there getting ready. did he watch the masters i'm sure he did. i'll see him after the break tte. burger and fries... soup and salad. like your workplace benefits and retirement savings. with voya, considering all your financial choices together can help you make smarter decisions. voya. well planned. well invested. well protected. your brain is an amazing thing. but as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory.

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- in the last two years, we quadrupled our team and the pace we're growing, i couldn't keep up without ziprecruiter. they do the legwork and they get my job posting in front of the right candidates. i love invite to apply. i instantly see great candidates and i can invite them to apply. we have hired across all departments, engineering, marketing, hardware, field techs. you can basically tell ziprecruiter who you need, when you need it, and they deliver. - [narrator] ziprecruiter. rated the number one hiring site. try it for free at ziprecruiter.com try it for free at ziprecruiter.com welcome to "power lunch," everybody. welcome back, kelly evans, by the way. >> thank you >> i'm tyler mathisen. coming up, a busy week for the markets on the economic front with the cpi and retail sales. but also earnings season kicking off for a lot of the big banks what you need to watch for and what you should be doing with your money ahead o