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Quest Means Business

Dow Plunges 1,000 Points In Worst Day Since 2020; Bitcoin Losses Cost El Salvador Tens Of Millions Of Dollars; U.S. Confident Turkey Won't Veto Sweden, Finland Bids; Data Suggests Deliberate Crash Of China Eastern Plane; U.S. Parents Desperate For Baby Formula; Inflation Driving Up Vacation Costs; Wall Street Plummets. Aired 3-4p ET

Aired May 18, 2022 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[15:00:55]

ZAIN ASHER, CNN INTERNATIONAL HOST: It is the final hour of trading on Wall Street and things are looking very, very nasty. The Dow has just

plunged about 1,100 points. The NASDAQ is more than four percent lower.

Those are the markets and these are the main events: Signs of trouble in U.S. retail. New earnings just inflation is starting to hurt.

Turkey threatens to block a quick process for Sweden and Finland to join NATO.

And the hunt for baby formula across the United States: How the world's largest economy ended up with a dire shortage.

Coming to you live from New York, it is Wednesday, May 18th. I'm Zain Asher, in for my colleague, Richard Quest, and this is QUEST MEANS

BUSINESS.

Good evening.

After three days of relative calm, the selloff is back on Wall Street. The Dow is down more than 1,000 points on track for its worst day since 2020.

The S&P 500 and the NASDAQ are off even further. Markets plunged after target reported a stunning 52 percent drop in its first quarter profit.

The U.S. retailer says supply chain issues are adding to its expenses and shoppers are buying less because of an inflation. Target's shares are down

more than a quarter, its rival Walmart had a similar warning yesterday and its shares saw their worst day in 35 years.

Liz Young is the Head of Investment Strategy at SoFi. She joins us live now from New York.

Liz, thank you so much for being with us. Here is the thing: Inflation fears are nothing new. The fact that the Fed is going to be raising

interest rates, that's nothing new. But it is really this idea that now inflation is hurting corporate America, hurting profits. That's the key

here.

LIZ YOUNG, HEAD OF INVESTMENT STRATEGY, SOFI: That's one of the keys. I think actually, the bigger key is that we're now getting confirmation that

the consumer has slowed down a bit in spending and that was the big positive that we came into this on. We were hanging our hat on the fact

that the consumer was still spending a lot, still had a lot in savings, there was all this pent up demand. The labor market was strong, so the

consumer would stay strong.

And now, we're getting those first hints of maybe there is going to be a relaxation and spending, maybe there's going to be a difference in patterns

as we move through summer and things could cool off a little.

But I would also suggest that that's what needs to happen in order to bring inflation down. So although unfortunately, retail stocks are getting hit

hard today, some of the movement and some of the data that came in is not necessarily the worst thing for the inflation picture.

ASHER: So how mixed is the data? Because you're getting, you know, in terms of retail stocks, certainly a bleak picture. But retail sales coming

in rising at about one percent in April. That showed a slightly more of a positive picture. So just walk us through the numbers here.

YOUNG: Yes, so the retail sales number actually missed expectations very slightly, but it was still positive for April. If you look at though, going

into now we're in May, we get into June, once we get those May numbers, I think we're going to see a little bit of a relaxation in retail sales.

Also, retail is a big category. So, you'd have to lump things in there that are also luxury brands, those don't necessarily get hit hardest, at least

on the front end, the luxury consumer tends to react a little bit later in the cycle. So you're going to see some of the brands that are more

sensitive to lower end spending get hit harder and get hit faster.

The other thing I would say is that the consumer can react a lot more quickly than a business can react. If you think about a business and what

goes into controlling costs and trying to protect the net income picture, it takes them a longer time to decide, okay, we need to pull back on

spending, maybe we hire less. Those are longer quarterly decisions, whereas the consumer can decide on a Friday that they're not going to spend as much

next week.

So there's a timeline difference there, too.

[15:05:04]

ASHER: And Fed Chair Jerome Powell just said yesterday that listen, if inflation isn't tamed, if it isn't contained, then the Fed will have to

continue raising interest rates until it is. How is the market likely to respond to that in the short term?

YOUNG: Well, I think we were seeing some of the response today, and we've seen quite a few down days already this year, actually the most down days

that we've seen at this point in the year since 2009. So the reaction to his comments, first of all, the comments were not really a surprise, and

inflation is still very high. So they do need to control it.

It doesn't change the expectation that we're going to see probably another 50-basis-point hike in June, maybe another one in July, and that they need

to see data that shows them that the peak in inflation is behind us.

The challenge that markets have to get through now is that we're not going to have confirmation of that, until probably closer to the third quarter,

or maybe into the third quarter. And we still have to deal with some uncertainty around midterm elections.

So there's still a lot to trudge through here for markets, and I don't think that it's going to let up unfortunately, as far as volatility goes,

for the next few weeks. We still have to get through a few more Fed hikes, and maybe even into July, when we're going to see volatility finally calm

down a bit.

ASHER: So chances of a recession at this point, and how does the U.S. stave off one?

YOUNG: Well, I don't think that we're going to see a recession in 2022. I think that the negative GDP print that we saw in the first quarter was due

to some factors that are a little bit more short term. So I don't think we're going to see that recession, meaning two consecutive quarters of

negative GDP growth. I don't think we'll see that this year.

2023 is a different story, but how does the U.S. stave off a recession? This is something that I think people always need to remember. You don't

have to go into a recession in order to just cool down demand. So, it is possible that demand can cool, the consumer can spend less. We can see

earnings revisions downward a little bit without everything going into a complete contraction.

So that's what the Fed is hoping for. That's what I'm hoping for, for the rest of the year and into 2023 that we just see a moderation in growth, a

moderation in demand that brings us more into balance, but that we avoid a big recessionary scenario.

ASHER: Yes, that's a good point. Let's hope a lot of the fears that many have are indeed overblown.

Liz, we have to leave it there. Thank you so much. Appreciate it.

YOUNG: Thank you.

ASHER: All right, CEOs haven't been this pessimistic about the U.S. economy since the start of the pandemic. The latest survey from the

Conference Board found a solid majority expect it to go into a recession. Sixty one percent say conditions have gotten worse over the last six

months. More than half say they're dealing with rising costs by passing these costs along to consumers.

Matt Egan is joining us live now from New York. So Matt, I guess the good news here is that a lot of these CEOs, even though the majority think there

will be a recession, they don't necessarily think it's going to be a deep recession. They believe it'll be a mild one.

MATT EGAN, CNN REPORTER: That's right, Zain.

I guess, that also speaks to where we are right now, but the good news is that most CEOs are only anticipating a short, mild recession. But it is

also kind of crazy that we're even talking about a recession. This economic expansion has only been going on for two years. And you know, people are

still recovering financially from the last downturn.

But we're dealing with a very different kind of expansion here. This is sort of setting up to potentially be a boom-bust scenario where the economy

is growing so fast that it overheats. That's the big concern here.

I think that we're hearing similar concerns from investors today, when you look at what's happening in the stock market, the Dow down more than 1,100

points. The common theme with this CEO survey is high inflation.

You know, the worry among business leaders is that the Federal Reserve is going to tame inflation by raising interest rates so much that it

accidentally tips the economy over into a recession.

And you know, I think that these findings in a survey, as you can see 68 percent expect this Fed-induced recession.

I think one of the concerns here is that business leaders could actually be talking themselves into a recession where they hunker down prematurely,

they kind of stop spending as much, maybe they lay off some workers, they cut costs, and that that actually causes the recession.

And I think another key point, though, from the survey is, we don't know that much about timing. Business leaders are not necessarily saying they

expect an imminent recession. The survey describes it only as over the next several years.

But hopefully, Zain, this gloom and doom is overdone because this expansion is just two years old.

ASHER: Now, but an interesting point you brought up there, this idea that perhaps just by theory, there's going to be a recession that a lot of CEOs

and companies in this country end up inadvertently causing one.

One thing the CEOs did say is that they are dealing with rising prices in this country by passing them on to consumers. What does that mean for

consumer spending?

[15:10:12]

EGAN: Well, so far, it hasn't meant that much. I mean, people are still spending pretty aggressively. They may be shifting in what they're spending

on some less durables and more services and food and the like. But at some point, the concern, of course, is that consumers are going to get tapped

out, whether it's because of the fact that food prices are up.

I was just looking milk prices in the United States are rising at the fastest pace since 2008. Gas prices, we talk about that a lot. The national

average in the U.S. is the highest it's ever been, and there are projections that it could go even higher.

So I think the worry is that as businesses pass this on, it is going to become a problem for consumers and consumer spending is the biggest driver

of the economy. But Zain, what's interesting is that I think that today's selloff on Wall Street is sort of an awakening by investors realizing that

high inflation isn't just bad for consumers, it could be bad for companies too, because we heard from Target today, talking about this really

surprising decline in profits, Target on track for its worst day since Black Monday of 1987. This just comes a day after Walmart sounded the

inflation alarm and also suffered its worst day since 1987.

So, you know, this is high inflation problem is not just an issue for households, it is a problem for companies and investors, too.

ASHER: Yes, and that is the problem that the Fed is desperately trying to mitigate right now. We have to leave it there. Matt Egan, thank you so

much.

The selloff is extending beyond the equity markets. Bitcoins' bad spell is getting uglier. Cryptocurrency is continuing its decline, shedding nearly

five percent of its value since this morning. Bitcoin started the day at around $30,000.00.

The crypto selloff is costing El Salvador tens of millions of dollars. Last year, it became the first country to adopt Bitcoin as legal tender.

President Nayib Bukele claiming Salvadorians would actually be better off now after global investors ditched $1 trillion worth of crypto last week.

Experts say, Bukele's so-called Bitcoin nation is that risk of defaulting.

CNN's Rafael Romo reports.

(BEGIN VIDEOTAPE)

RAFAEL ROMO, CNN CORRESPONDENT (voice over): it was flashy, loud, and colorful. The special effects rival those of a rock concert. That's how El

Presidente made his grand entrance greeting everybody in English, no old- fashioned suit or tie needed.

NAYIB BUKELE, EL SALVADOR PRESIDENT: We demonstrated that Bitcoin could do a lot of good things.

ROMO (voice over): Nayib Bukele, the 40-year-old millennial president of El Salvador told the crowd he is making his Central American nation of 6.5

million, a Bitcoin nation.

That was back in November, when the market cap for cryptocurrency hit $3 trillion.

Bukele Kelly started promoting Bitcoin during the summer.

BUKELE: This will generate jobs and help provide financial inclusion to thousands outside the formal economy.

ROMO (voice over): And in September, El Salvador became the first country to make Bitcoin legal tender alongside the U.S. dollar. Two months later,

the President announced plans to build a city where Bitcoin would reign supreme.

But not everyone has jumped on the Bitcoin bandwagon.

JULIO SEVILLA, PROFESSOR, UNIVERSITY OF GEORGIA: It's supposed to be the currency right now, Bitcoin, but people are not using it. It's mostly, you

know, businesses, international businesses like Starbucks, like McDonald's that are accepting Bitcoin because, you know, they don't want to be at the

fault with the policies of the government.

ROMO (voice over): And the government has gone all in, buying up more than 2,300 Bitcoins since September to the tune of more than $103 million.

The problem is that in the same period, the cryptocurrency has lost more than 35 percent of its value, meaning the Salvadoran taxpayers are tens of

millions of dollars in the red, thanks to their President's investment strategy.

The President's answer, "Buy the dip," words he has posted multiple times on Twitter.

SEVILLA: For an investor, for an individual investor, it may make sense, right, to say buy the dip, but the problem for our country, the risk is way

bigger and we don't know if this is the dip.

ROMO (voice over): Georgia University Business Professor, Julio Sevilla says the risk goes beyond losing money.

SEVILLA: Their own bond market has also suffered a lot. You know, it's up there with Ukraine on the riskier bonds perceived as countries on Ukraine.

You know, it's in a war that they didn't induce. El Salvador getting into this risk voluntarily.

ROMO (on camera): On the one hand, El Salvador is making a risky investment, on the other, the small Central American country is counting on

help from the International Monetary Fund to repay government bonds worth $800 million. The bonds are due in January and this burden is in addition

to other financial obligations.

How big is the risk of default?

[15:125:00]

SEVILLA: If the President keeps on buying as Bitcoin goes down, I think the risk of default may be larger because at some point, the IMF is going

to say no, we cannot loan your money. You're not doing things the right way.

ROMO (voice over): Sevilla says, he still expects El Salvador to get financing, but if its President continues to double down on risky

investments, he says, default is a very real possibility and Bukele's dream of making his country a Bitcoin nation could become a mirage.

Rafael Romo, CNN, Atlanta.

(END VIDEOTAPE)

ASHER: All right, up next on QUEST MEANS BUSINESS, U.S. President Biden says he is confident that Finland and Sweden will join NATO, but they will

of course have to win over Turkey first.

We'll have a live report from Stockholm, next.

(COMMERCIAL BREAK)

ASHER: U.S. President Biden says he is confident that Sweden and Finland will overcome Turkey's objection to their membership in NATO.

Turkey held calls with both nations after they formally applied today to join the Alliance. Turkey says Sweden and Finland harbor people it believes

to be terrorists. It says, it cannot support the bids unless it sees concrete steps to address this.

Nina dos Santos joins us live now. So Nina, a lot of people, though, are still confident that the issue with Turkey is going to be resolved. Why is

that?

NINA DOS SANTOS, CNN CORRESPONDENT: Well, not least, the President of the United States, as you heard there, Joe Biden saying I think we will manage

to resolve this one and that has been confirmed by many members of the State Department and the White House's top echelons.

We've had Jake Sullivan, the National Security Adviser saying: "We're confident that at the end of the day, Finland and Sweden will have an

effective and an efficient accession process here to NATO."

Antony Blinken meeting with his Turkish counterpart in New York as well today saying that, look, we recognize from the United States' side that

this is a process and all 30 members have to agree unanimously. So if Turkey does have some grievances, well, we'll hear them and there is a

format and a forum to hear them.

But as you can see, they are confident that at this point, Turkey may realize that accession by these two crucial states here in Northern Europe

would solidify the bloc's security in a huge way. You know, these are big countries that have a big defense spending budgets.

Sweden in particular has a huge Defense sector that's worth about $7 billion at the last estimate, and so this would in theory be a win-win at

the end of the day for the whole of NATO.

[15:20:06]

Also it doesn't look particularly flattering Turkey, at the end of the day appearing to be a spoiler, but many defense analysts I've been speaking to,

as well here in Stockholm have been saying, well look, at the end of the day, this is really an opportunity for Turkey to speak via this process

directly to the United States and to air some grievances that it has about a number of issues, notably, support for Kurdish separatist movements, but

also an arms embargo that has been imposed upon Turkey, which is becoming a bigger supplier of unmanned drones and weaponry in the world, imposed upon

Turkey by Sweden and some other E.U. nations after it had a military operation against Kurdish separatists in Northeastern Syria.

So this really is a negotiating game. At the end of the day, nobody really thinks that Turkey will actually use its veto in this process, but who

knows it could take up to a year for these countries to accede to NATO -- Zain.

ASHER: All right, Nina dos Santos, live for us there. Thank you so much.

Finland's main gas supplier says it could be cut off from Russian gas as early as this weekend. It is the latest European energy supplier to warn of

cuts after refusing to pay in rubles. Energy firms are grappling with how to pay Russia without breaking sanctions.

Meantime, the European Union has unveiled a new plan to cut its reliance on Russian energy. Anna Stewart joins us live now.

So that is really the big question: How does the E.U. wean itself off of Russian gas because of course, it's going to be complicated, and it

certainly will not come cheap -- Anna.

ANNA STEWART, CNN REPORTER: It certainly won't come cheap, and actually this big package that was unveiled today looking to completely rid them of

Russian energy reliance by 2027 comes with a price tag of $220 billion. Now, Zain, they have actually gone some way to reduce their reliance on

Russian energy already, they've banned Russian coal from being imported.

The E.U. Commission has proposed banning Russian oil, but as we know that's hit a bit of a stumbling block with some members like Hungary refusing to

sign up to it. And in terms of gas, they are still looking to reduce their reliance on Russian gas by two-thirds this year.

Now as this big package came out, a part of it is looking at just replacing that natural gas particularly short term with LNG, liquefied gas coming

from elsewhere, from the U.S., from Canada. It will require a lot of infrastructure around the bloc to try and get all of that gas moving and to

get enough in.

And then it's looking longer term, and the silver lining really is, it is going full on and accelerating its shift to green energy. So a lot of the

$220 billion price tag is on renewable energies, and they are looking at all sorts of different measures.

You know, ability, for instance, to speed up introducing new energy infrastructure projects, removing some of the red tape, ensuring that new

buildings within the E.U. have solar energy panels, if they're public buildings by 2025.

There's a lot in there. It is definitely a move in the right direction. We all moan about the E.U.'s reliance on Russian energy. This is a plan to

work on that, rid its reliance from Russian energy, but it needs to be agreed on by all of the member states, and that's always the issue that we

have to remember these big E.U. announcements, and it needs to be implemented.

And this will be painful, it involves some sacrifices from some E.U. member states.

ASHER: And so, the big question is how does -- how do these countries pay or go without paying in rubles, but at the same time still fall in line

with sanctions?

STEWART: Yes, so President Putin issued a decree not that long ago that European gas companies from unfriendly countries would have to pay for

their gas in rubles. The contracts dictate they have to pay in euros, not rubles. But anyway, there is an issue here because clearly some E.U.

nations absolutely need their gas and the E.U. has issued very conflicting guidance on how this can be done without breaching sanctions. And there is

still, I have to say a lot of uncertainty.

Now, you mentioned the Finnish company, Gasum. That's one company that has decided it's not going to play ball with you know, Gazprombank's very

complicated payment mechanism that would somehow allow it to have pay in euros have that converted to rubles. They said they're not doing it and

they are prepared to be cut off from gas as early as Friday evening. That has already happened to Bulgaria and Poland.

So, the big concern here for some European countries who are more reliant on Russia for their gas, much more so than Finland, is what of the E.U.

says they absolutely cannot continue to pay for gas, and then they get cut off -- Zain.

ASHER: Anna Stewart, live for us there. Thank you so much.

Russia says nearly a thousand Ukrainian soldiers at the Azovstal steel plant in Mariupol have surrendered since Monday. CNN cannot confirm the

Russian tally. Most of the soldiers appear to have been taken to Russian- controlled territory. Ukraine has not yet given its count of the number of fighters who have left the plant. There has been no update on negotiations

to exchange the fighters for Russian prisoners.

A failed river crossing turned into a graveyard of Russian tanks. CNN's Sam Kiley reports from the scene of one of Russia's worst defeats in Ukraine.

[15:25:12]

SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): The first signs of a Russian disaster, a Z-marked Russian tank being salvaged by

Ukrainian troops.

A few days ago, this was the scene on the edge of these woods, Russian pontoon bridges and a ferocious Ukrainian artillery attack. The Ukrainian

Commander with us cast an eye to the sky looking for Russian drones. This is no place for complacency.

Ukraine and NATO have claimed that Russia suffered badly here. They estimate 70 to 80 vehicles destroyed and a whole Russian battle group of a

thousand men mauled.

KILEY (on camera): So we're at the edge now of the area where the Russian Army was caught after it had crossed the pontoon river. You can see down

here, there is a destroyed tank. Next to it, an armored personnel carrier, and if we look down the road here, we've got another armored personnel

carrier and another and another.

The Ukrainians were able, they say due to their superior reconnaissance, and Intelligence to work out where the Russians were going to cross and

then bring in devastating levels of artillery, and this is the result. This is only the edge of it.

KILEY (voice over): Russia has now shifted its attacks elsewhere, at least for now.

KILEY (on camera): When you see this, how do you feel?

UNIDENTIFIED MALE: Super.

UNIDENTIFIED MALE (through translator): Great. I understand that our artillery is working and our troops are working, too because there was both

artillery and ground fighting. The units in cooperation with other troops were pushing the enemy across the river on foot.

KILEY (voice over): Shattered Russian armor is scattered along this path through the woodland.

On the ground, we can't move forward. The track is mined.

KILEY (on camera): a real disaster for the Russians, but something that the Ukrainians now are saying here that means that the pressure is off this

particular front for now, and that they believe that the Russians are focusing more of their efforts elsewhere.

Ukrainian soldiers pick over the debris of this victory, but the chilling truth is that many of their comrades have ended up like this.

And while this is a success in the grinding war for Ukraine, Russia remains an immediate threat.

KILEY (on camera): And they've asked us to get out of here with their military Commander because they are worried that our cars are going to

attract attention and therefore attracting coming. This is still clearly an extremely active area.

KILEY (voice over): And one, as it was for the Russians, but a considerable relief to leave.

Sam Kiley, CNN, Bilohorivka.

(END VIDEOTAPE)

ASHER: New clues about the possible cause of China Eastern's deadly plane crash in March. "The Wall Street Journal" says the U.S. investigators

believe the crash may not have been an accident.

We'll have more on this next.

(COMMERCIAL BREAK)

[15:30:00]

(MUSIC PLAYING)

ASHER (voice-over): Hello, I'm Zain Asher. There is more QUEST MEANS BUSINESS in a moment.

When shocking evidence from an investigation into a deadly China Eastern plane crash suggests it may have been brought down deliberately.

And a nationwide shortage of baby formula is driving parents to take drastic steps.

These are the headlines at this hour.

(MUSIC PLAYING)

ASHER (voice-over): The war crimes trial for a 21 year old Russian soldier resumes tomorrow in the capital of Ukraine. Vadim Shyshimarin pled guilty

today and could spend life in prison. He's accused of shooting and killing a 62-year-old unarmed civilian.

This is the first such trial held since Russia invaded Ukraine almost three months ago.

The U.S. has reopened its embassy in Kyiv three months after closing it ahead of Russia's invasion. Diplomats marked the reopening by raising the

American flag in front of the building. The U.S. secretary of state called it a momentous step and pledged to continue supporting Ukraine.

In Pennsylvania, the high stakes Republican Senate primary race is still too close to call. They are just a few thousand votes apart, well within

the margins for a recount. The outcome could ultimately decide who controls the U.S. Senate.

(MUSIC PLAYING)

ASHER: Recovered black box data suggests the China Eastern airline crash in March was a deliberate act. That is according to "The Wall Street

Journal," citing U.S. investigators.

The Boeing 737 nosedived into a mountain from 29,000 feet up the air, killing all 132 people on board. You see the video there, just incredible.

"The Journal" quoted one source familiar with the probe, who said the plane did what it was told to do by someone in the cockpit. CNN's Beijing bureau

chief Steven Jiang has more.

(BEGIN VIDEOTAPE)

STEVEN JIANG, CNN SENIOR PRODUCER, BEIJING BUREAU: Even before "The Wall Street Journal" story was published, there had been a lot of speculation on

Chinese internet about this crash being caused by pilot suicide.

As many experts have pointed out, the Boeing 737 simply doesn't fall out of the sky. China has strongly denied those so-called rumors. But after "The

Journal" article was published, we've seen the airline industry regulator here issue a statement to state media, basically saying they have reached

out to their American counterparts at the U.S. National Transportation Safety Board.

What the Americans have told the Chinese, according to CAC, is that they have not released information about the investigation to any media. Notice

how carefully worded both sides have been. Neither the Americans nor the Chinese have directly denied the crux of "The Journal" report, which was

this deadly crash was caused by human inputs from the cockpit.

Analysts and observers have also pointed out to some suggestions that the Chinese authorities may be concerned about, if not aware, of the human

factors involved in this crash, because, on April 6th, just a few weeks after this crash, the CAC authorities held a nationwide conference on air

safety, with the minister of civil aviation, urging officials across the country to pay particular attention to pilots' state of mind, saying all

front line employees but especially pilots need to be physically and mentally fit to fly to ensure the safety of the entire industry.

Other observers have also pointed out the fact that the 737-800 series continues to be operated by Chinese airlines after the crash as another

sign that this crash was not caused by mechanical or technical failures.

[15:35:00]

Even China Eastern itself, after suspending commercial services of the aircraft for a period of time, has resumed flying this popular craft across

China -- Steven Jiang, CNN, Beijing.

(END VIDEOTAPE)

ASHER: A shortage of baby formula is placing massive strain on new parents across the U.S. We will give you the latest on the problem and how it got

this far. That's next.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

ASHER: Some parents in the U.S. are growing desperate to get their hands on baby formula. The shortage was sparked by a recall from Abbott Labs, one

of just four major producers in the United States.

Before the shortage, the U.S. government put a 17.5 percent tariff on formula made overseas, effectively making the U.S. its only supplier. And

some U.S. states have limited options as a result of exclusive contracts with suppliers for the formula that is distributed through welfare

programs.

Joe Biden says the White House and FDA are collaborating on the issue.

(BEGIN VIDEO CLIP)

JOE BIDEN (D), PRESIDENT OF THE UNITED STATES: Today, we took another important step with the FDA, the Food and Drug Administration, announcing

guidance that will allow major formula manufacturers to safely import formula that is not currently being produced in the U.S. market.

The FDA will closely monitor the product quality and safety.

(END VIDEO CLIP)

ASHER: This result, of all this disruption, parents are growing increasingly desperate to find food for their children.

(BEGIN VIDEO CLIP)

COLLEEN HAFENCHER, MOTHER: When I get to work in the morning, I look for formula. When we are finally sitting on the couch for an hour at night, we

are looking for formula. So I have not found any in about three weeks.

(END VIDEO CLIP)

ASHER: What a nightmare. Shazi Visram is the founder of Happy Family Organics, one of the top organic baby food brands, and she joins us now.

As a mother myself, I consider myself very lucky. My son is 10 months old and even though it has been certainly a nightmare finding formula in this

country, the fact is, worst-case scenario, I can switch him to cow's milk a little bit early.

For mothers who have just given birth, though, who are desperate to find infant formula in this country, what are the options?

SHAZI VISRAM, HAPPY FAMILY ORGANICS: Well, you know, I really want to be a part of the solution. I think mothers can help other mothers. And parents

want to help other parents.

[15:40:00]

And this should have never happened in the first place. We can talk about why. We can talk about what we should do in the future.

But if you need help right now, my goal is to pair parents who have means with parents who need help. So go to healthybaby.com. Say you can help or

say you need help and we will pair you because if you are a mother looking for formula today, it is very difficult, especially if you are constrained

by a challenging work environment, which many mothers are.

ASHER: How did we get here though?

That's the question I have. You know, many people are saying that, obviously, we have known for several months about the supply chain issues.

And of course, you had one manufacturing facility that was shut down because of a recall.

But should the government, should the FDA, have really seen this coming?

What are your thoughts on that?

VISRAM: Well, I have a lot of thoughts on this. I'm a mom and was a producer of infant formula and I know the challenges of innovating to get

something to market. So how we got here is that we have a concentration of 90 percent of the formula in our country being made by four players.

One of the key players, with 40 percent of the market, had a major supply chain challenge. A lot of people do not know what it takes to make infant

formula. It is a highly, highly vulnerable population. There should be so much support from the FDA to maintain safe formula production.

By the same token, the supply chain is really interesting and a lot of people don't really understand it takes 7,500 -- sorry -- 750 gallons of

water to make one tub of infant formula. It takes many years to innovate to get to a place to have a new formulation to the marketplace.

So the answer is the government should never have let this happen. The answer is we are highly, highly technologically advanced as a society and

we have predictive technology.

So when a major player cannot supply a portion of the marketplace that is depending on them for the well-being of their babies and this portion of

the marketplace can only use their WIC dollars to buy their brand, that should have been a 9-1-1 call on day one.

That is what should have happened immediately so we can address the situation, which now we are finding solutions. But it's still a long term

challenge.

ASHER: So as you point out, as someone who has worked in this industry, the barriers to entry in terms of manufacturing formula in the country are

extraordinarily high.

But what do you make of how the FDA has handled the situation so far?

You know, we talked about the fact that one manufacturing facility ended up needing to be closed because of a recall.

How is the FDA handling it so far?

And what should they be doing differently from this point forward?

VISRAM: That's a great point. So the FDA is working with Abbott to make sure they can make clean formula. And that is what they should do with

anyone who supplies infant formula for such a vulnerable population.

So steps are being taken. And in some times, it takes more time to fix a problem if there is a bacterial problem. It takes time to get to the root

of it and make sure things are clean.

While we are doing that, we need to have safety stock. While we are doing that, we need to have alternatives so that Americans do not go hungry and

that babies, in their most vulnerable stage in life, the first thousand days, when they become who they will be, we have to ensure they have the

health and nutrition to develop their brains and bodies.

So there should have been, in my opinion, there should be safety stock. And there should already be agreements with the major formula production around

the world to ensure that, when we have a shortage, we also have some backfill.

ASHER: Right, because what happens the next time there is a infant formula recall?

We cannot be in the situation again. I have to leave it there. Thank you so much for being with us.

VISRAM: My pleasure. Thank you, Zain.

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[15:45:00]

ASHER: The travel industries anticipated some recovery is getting a rude awakening. recruiting. Some may be thinking vacations as the costs of

airfare, hotels and car rentals surge. The CEO of Trivago joins us next.

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ASHER: Inflation in the U.K. hit its highest rate in 40 years last month on both sides of the Atlantic. Gas, rent and groceries are getting much

more expensive.

[15:50:00]

So, too, is the average vacation. Airline tickets in the U.S. have surged 25 percent in the last year largely because of rising fuel prices. Hotel

and motel prices have shot up 23 percent. Car rentals are up over 10 percent.

Search firm Trivago lets users compare hotel deals across various sites. CEO Axel Hefer joins us now life from Dusseldorf, Germany.

Thanks so much for being with us. There is so much pent-up demand as a result of the pandemic when it comes to travel.

How have these high prices affecting consumer interest in traveling now?

AXEL HEFER, CEO, TRIVAGO: We do think that the summer will still be a very strong summer season because as you rightly say, a lot is coming out of the

pandemic. A study showed 83 percent of Americans say that they think this will be the best summer break ever.

But prices are going up and we as a business obviously, we provide a service that helps you to compare prices. So we are looking into the summer

very positively.

ASHER: It hasn't affected demand, these rising prices.

Or how much has it affected demand?

HEFER: From our perspective it has not yet and I don't think that it will affect the overall demand that much. We see, again, in the last two years,

with all the disruption in travel that people still want to take a break.

But they might go for a different break, so cheaper transportation perhaps, a cheaper hotel. But there is a huge desire to get a summer break.

ASHER: Obviously profits for airlines, hotels plunged during the pandemic.

How much of the higher prices now actually helping the industry as a whole?

HEFER: That is difficult to say. The costs are going up a lot. And to what extent airlines are passing on more than the increasing costs I can't

really judge.

The other thing that is also impacting prices, there is still a labor shortage, particularly for accommodations. Salaries are growing quite

quickly, which is also something to consider.

ASHER: How long can we expect these inflated prices?

HEFER: That is a difficult question. With general inflation, it is staying high. Then prices for hotel and for transportation are continuing to climb.

I'm not an economist but I don't necessarily see an end to it.

ASHER: In terms of other factors at play, obviously there are serious COVID restrictions coming out of China, for example.

How much is that market suppressing demand overall?

HEFER: The Asian market is overall a lot more complex. China is much more restrictive. You can see that in many destinations they are popular with

Chinese tourists. In other parts of Asia, Europe, the U.S.

Our expectation on the recovery of Asia overall is much more negative than for Western Europe and the Americas. We do think that next year we will see

significant recovery. But it is taking much more time than what we've experienced ourselves.

ASHER: Have the high prices affected the types of vacations that people are looking for now?

HEFER: Not so far at least what we can see. But I do think that that is something that is likely, we will see a slight mix of change in the weeks

and months to come. Because the cost consciousness of the users and of the travelers is going up.

ASHER: Thank you for being with us, we appreciate it.

It has been a punishing day on Wall Street. The Dow has tumbled over 1,000 points. The S&P and Nasdaq are off about 4 percent or more. Growth stocks

are dragging them down. The markets are still looking for the bottom. Paul La Monica is here.

Your thoughts on this?

It is really the retail sector, those earnings reports that are suffering the most.

PAUL LA MONICA, CNNMONEY DIGITAL CORRESPONDENT: Yes, exactly. You had really lousy earnings from Target this morning, triggering this massive

selloff. That comes one day after Target's top rival, Walmart, also reported poor earnings and a weak outlook.

You're looking at both stocks having, with Walmart yesterday, their worst one-day decline since the market crash of 1987. That is obviously a very

sobering factor here.

[15:55:00]

I think right now investors are worried about stagflation. Inflation is still very high. But the economy seems to be starting to slow as well. So

that is a very toxic mix for investors and consumers right now. That is why you're seeing retail stocks tumble and they're bringing the entire market

down with them today.

ASHER: The fact that Jay Powell said we are going to do whatever it takes to tame inflation, we will continue raising rates until we manage to

contain it.

How is the market likely to respond that?

LA MONICA: I think the market is concerned, one, that the Fed waited too long to start to combat inflation but also now that they are playing catch-

up. If these rate hikes are going to be aggressive, it might be that proverbial case of too much of a medicine that hurts inflation winds up

hurting the patient.

In this case, the U.S. economy and U.S. stock market. If rates continue to rise, that may mean the housing market going down, that is not. Good

ASHER: Yes, treat the illness without killing the patient in the process. Paul La Monica, live for us there, thank you so much.

There are moments left to trade on Wall Street, we will have more updates after this.

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ASHER: There are just moments left to trade on Wall Street. The Dow remains down almost 1,200 points. Earnings from some big retailers have

revealed inflation's bite and investors are not happy.

Let's look at the Dow. The entire board is in the red. Walgreens, cocoa (ph) and Walmart among the biggest losers. No winners to report here.

That is QUEST MEANS BUSINESS. I'm Zain Asher in New York. The closing bell is about to ring on Wall Street. "THE LEAD WITH JAKE TAPPER" is next.

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