Power Lunch - Adobe Falls on AI Concerns, Gen Z Heading Back to the Mall 12/12/24

Episode Date: December 12, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Chris Grissanti is with us from MAI Capital, host, guest host for the full hour. Major markets are flat today, but we've got some earnings to tell you about. Adobe, down big following its results. Broadcom reporting after the bell amid reports it is working with Apple. Is it a threat to Nvidia in the chip space? We heard from one individual yesterday who really loved Broadcom. Costco also reporting this afternoon. Always interesting to hear what people are buying in bulk at Costco. We'll break down those stocks and get Chris's take throughout the show, Cal.

Costco at almost $1,000. It's traded as high as $1,007, but one of the many round numbers to keep an eye on today. And it's part two of our series on the future of malls. We're going to hear why Gen Z actually likes the mall and why the retail players, Tyler, who I was familiar with from my mall days back in the 90s, are still capitalizing on that traffic. Yeah, it seems like the malls are making a little bit of a mini comeback. And I always like going there.

I like the idea of being able to see and touch and feel the merch. Have you ever, we wrote those, you know, the pandas, like the little stuffed animals you can write. Yeah. That was $15 well spent. And we're talking to the agent who just negotiated the biggest deal in the history of sports, Scott Boris. Many fans don't like him, but there's no denying the work he does is getting huge dollars for his clients. There is really probably no more efficient agent in the business than Scott Boris. And what's the, there's a press conference or something today?

Press conference at 3 o'clock today where the Mets will, quote, introduce Juan Soto as if he needs any introduction in the New York market, which he does not. But we start with markets as President-elect Trump rang the opening bell at the New York Stock Exchange after being named Times Person of the Year. Our Jim Kramer spoke with the President-elect at the NYSE. What can you say to the working person who owns stocks? Should they buy more stock? Well, I don't want to get into a situation where they do and we have a dip or something, because that can always happen. You know that better than anybody in the world probably. I think you're the leading authority in going up and going down, but you always end up.

He always ends up. That's the good news. But we have, like, Doug Bergam standing right over here, has done a fantastic job. He's been on your show many times, and we have just tremendous people. I would say this, I think, long term, this is going to be a country like no other. We had the three best years ever until COVID came in. And then we did a good job getting rid of it, the stock market. If you look at the markets were higher than just previous to COVID coming in when we handed it over.

Well, the markets have jumped since President-elect Trump was elected again, a little more than a month ago. Dow and S&P 500 up about 5% in that time, the NASDAQ, up about 8% record highs across the board. For more on how to position ahead of Trump's second term, let's bring in Kevin Nass&M. Nicholson, partner and global fixed income CIO at Riverfront Investment Group. Kevin, welcome. Good to have you with us. Thanks for having me. And we'll bring Chris into the conversation as well. On the market, you heard what President Trump, President Elect Trump said. He expects the economy to be good, America to be great again, and markets to keep on moving up, but doesn't discount the possibility of a dip. Do you see 2025 as potentially a year with lower returns

and we've become accustomed to over these past couple of years, in part because some of those returns have been pulled forward into 2024. Tyler, I definitely think that that is the case. You know, for the last couple of years, we've had very robust markets. And going into next year, our base case is that the S&P will be up somewhere between four and a half and six percent. That being said, that'll take you, depending on where we end the year, that will take you somewhere close to about between 6350 and 6,500.

So, Chris, let me get your reaction to that, and I think you're kind of singing from the same hymnal here. I may even be a touch more conservative than Kevin. I think both Kevin and I, I look to Kevin's notes, and we're both forecasting 15% earnings growth for the S&P next year, and that's kind of consensus. But that's pretty high, considering we're at record margin. And Kevin, what do you think about the economy next year? I mean, 15% is about as good as it gets.

What's the downside from that kind of production? And especially when we're about 25 times earnings on the S&P. The biggest thing that we have to worry about, I think the markets have possibly gotten a little bit ahead of itself, largely because people are pricing in deregulation of markets next year. as well as the potential of new corporate tax cuts. And while all of that is good, the part that could potentially hurt us is that tariffs will be the deciding factor of how good corporate earnings are next year. And if tariffs are too high and generate inflation, that can be the downside that we see in the economy.

and start seeing a pullback in financial markets as well. Chris, run us through in the portfolio. What are kind of the, you know, maybe five or ten or twelve major positions that you're holding into next year? Well, Kelly, as I mentioned, I'm pretty conservative on the market here. So we're trying desperately to find some value. Healthcare is about as cheap as it's been against the S&P in 25 years. So we're almost doubly weighted.

in health care right now. So yeah, and it's doing us no good at all. Exactly. That's why I say. But if, you know, we don't have 15% earnings growth or if the market's not up another 30% last year like it's been for the last couple of years, then health care ought to be at least a decent performer and probably a nice outperformer in that kind of environment. What gives you the confidence to be conservative, right? Because if you're wrong, this could be another 20% year that we're, you know, chasing things down. Right. So I'll underperform in a year like. that if we have another way above average year. But what I'm planning on is I'm okay underperforming in a strongly up market. I don't want to lose my clients a whole lot of money

if we just revert to the norm, which is 16 to 18 times earnings. That's a 30 percent, you know, downturn from here. So that's the kind of mindset I'm having here. Kevin, walk us through what you've been doing in your portfolios, both fixed income and equity. What kind of moves have you been making in the last 60 days? So for our more equity-centric portfolios, we have been trying to position a little bit, get some more cyclicality in the portfolio. So we have bought financials, added some industrials to the portfolios, but we've also added a little bit of small caps. Now, I say a little bit. We have dipped our toe into the market because we know that that rotation may not, from growth to value, may not occur right away.

We have to see where policy goes in 2025, and that is where the fiscal policy goes, and that will determine whether or not that rotation will happen. In our shorter time horizon portfolios, we have been more focused on, and these are the balanced portfolios, we've been more focused on thinking about generating income, and we've been doing that by starting to think about ways that we can rotate into fixed income markets. So from a fixed income standpoint, we think that yields are going to be moving higher into next year. And so we have been, we're focused more on the short end of the curve, basically in that three to five year range. Because at this point, you're not getting paid to extend out to. Explain the thinking there. Yields are going to be moving higher in an environment where most people, and I believe including you, think the Fed is going to continue to cut interest rates. you'd think that would reduce you.

Well, it will reduce, it will reduce rates on the front end, but I think that we're going to have a bifurcated market where the long end is actually going to go higher. And with that, that's the reason we've been kind of hanging out on the front end. And as rates go higher, we will look to fill in the belly of the curve, that 10-year part of the yield curve. And just to be clear, from a Fed standpoint, While we think the Fed's going to lower rates, we do think that they're going to be slower to lower.

And so when we think about 2025, we're thinking that they'll be at three and seven, eights by the end of the year. Slower to lower. And look at rates today, Chris, they're sticky. Everyone except the Fed seems to think that things are going to be a little bit sticky. I'm with Kevin. I think we're finally going to get us positively sloped yield curve, but not for the good news that short rates are going to go to two, but for the bad news that long rates are going to go a little bit higher. Wow, all right.

All right. Kevin Nicholson, Chris Grissanti, sticking around for the whole hour. Kevin, thank you. Have a good holiday. And coming up, NVIDIA has been the darling of the chip sector of the whole market, really. The shares have nearly tripled this year, but could rival Broadcom be close to stealing its thunder? Broadcom has scored key contracts with OpenAI, Amazon, and reportedly Apple to help develop more customized chips. We'll dive into that when Power Lunch returns. Welcome back to Power Lench. Adobe is the worst performing stock and the S&P and the NASDAQ 100 today after its results.

Key concerns around its AI offerings, its ability to monetize them. Simomodi joins us with more. And CMA, I'd add to that even just where is its place going to be as these AI tools continue to explode. Yeah, that's right, Kelly and Tyler. We've now heard from two major software giants this week. It was Oracle. And then today, Adobe, both, their guidance has failed to really live up to experience. And if we double-click on Adobe, the street was really expecting more from management on how they're actually monetizing their AI tools.

Adobe recently announcing their acrobat AI assistant, which helps users synthesize and summarize PDFs and data. So something that they're really hoping will help lead on the AI front. But we didn't really get that monetization strategy on the call last night. If I look at what UBS said, they're saying Adobe's been pushing an AI narrative for two years now, and we still see no evidence. of monetization. The second issue is pricing. CEO, Shantrauddin, Narayan, was asked about how they're able to raise prices on their customer. He talked about the premium customer, but didn't really signal that he can raise prices on all of his customers. So that was a concern in why you're seeing a number of analysts downgrade the stock and also lower their price target on shares of Adobe.

This all matters because we've seen this huge rally in software stock since the election on the prospect of deregulation, consolidation, the prospect of more M&A. And Adobe's sort of been sitting out on this rally, the stocks that have really been benefiting are the names that have been able to articulate how they're monetizing AI. Salesforce has been a huge winner in the software space, as has Sana, DocuSign, and Service Now. Chris, your thoughts on Adobe? Well, you know, I think this is a great example of what we were just talking about even with Kevin, which is high expectations, Adobe, super high multiple, almost record high for Adobe. And the report was a little soft, but it wasn't that bad. I mean, the revenue misperience.

by maybe a percent, if you adjust for currency, probably less than a percent. So, but it just didn't quite make it, and the stock's down 10 percent. So this to me is more of a poster boy of high expectations for the whole AI group than it is a particular Adobe-specific issue. May I pick a bone with that? Yes. Which is just, so if I were thinking about the risk in the S&P 500, I'd say, is Adobe just losing share, right?

To competitors that either are already in the S&P or might be coming into the S&P, Is it more of a case of, look, its tools are fundamentally the kinds of tools that AI is really replacing. So is that just more Adobe specific? Now, I think you're pointing out a real risk so that, you know, if you have 100% market share, it can only get worse. And that's kind of where Adobe is now. Having said that, I didn't see any evidence of what you're talking about in this particular earnings report. I saw revenue that went up 9% instead of 10 and a half. And so, you know, I'd wait to make a judgment on this.

That's fair. Well, let's pivot another big-name tech stock that's going to report after the bell is Broadcom. It's lower right now, but the report comes as people wonder whether it could actually be, seem a threat in AI chips to the biggie. And Tyler, you and I have had this conversation. Some of the hyperscalers that Nvidia counts on as customers are trying to build their own in-house chips, but they need a design and networking partner. And that is where Broadcom has been playing a bigger role. They have contracts with OpenAI, Meta, Amazon, even Apple, is a problem.

reportedly working with Broadcom to design a cutting-edge chip that will be used to power AI capabilities expected to be released in 2026, according to a report from the information. Analysts say higher prices remain a sticking point for technology companies that buy Nvidia's chips. That's accelerating interest in developing an alternative option. However, as we know, it's not easy. Invidia has that first mover advantage, plus what Wall Street sees as the best group of engineers to keep innovating and delivering faster, powerful chips like Blackwell and. beyond that. So tonight, when Broadcom reports earnings, investors will look to CEO

Hawk 10 to provide a much-needed update on its progress and working with some of the biggest names in Silicon Valley and when, when we'll see an Nvidia competitor actually hit the market. You know, we had Ron Khrushchevsky on yesterday. We were talking about this, and he sort of made the point that was in your report there, Chris, and that is this, that there's Nvidia sitting out there, the big dog in this space with very expensive chips that can do basically everything. Broadcom may be able to come in with less expensive chips that do something that is very tailored and specific to the need of a broad business, of a broad sector of the market like

financials. That was Ron's argument for Broadcom. Did you see it that way? I see it somewhat differently, Tyler. It makes a good story that it's, you know, Pepsi versus Coke and, you know, that these two big guys are competing. But I see more of it as a win-win. I mean, Nvidia is like the hedgehog that knows one thing and knows it well.

It's all AI. It's the GPUs. But Broadcom is aptly names like the Fox that does many things all at once. There are much, they have lots and lots of semiconductor offerings, and they're terrific clients. You know, Apple being the perfect example. So I think there's room for both to win here. Again, I don't see evidence that they're kind of taking lunch away from Nvidia yet. There's some interesting headlines, but again, I think NVIDIA's numbers still show just terrific depth.

Yeah, it's interesting, Seema. Some of the discussion is shifting, though, to whether we need these massive AI data center clusters that are doing pre-training of all of these LLMs, or whether we're now shifting and there's lingo that I'm not going to use correctly, but to more inferencing. And that inferencing is actually lighter on the compute demands and might point away from the kind of get 100,000 Nvidia chips and bring that online and more towards something a little bit more targeted. and tailored that perhaps Broadcom could play a big role. And to Chris's point, this is already almost a $900 billion market cap. So if they are a winner here, some of that might be already priced in as well. Yeah, there's two parts of that AI model.

There's training the AI models where Invidia absolutely the dominant player and then inference as more companies push towards actually using the AI applications, that's where the opportunity could potentially be because there's others like Cerebris and GROC in the private world and then where Broadcom and some of these hyperscalers hope to play a bigger role because that's where the market is shifting. Yeah, which you wonder, I'm not saying it's a bare case for NVIDIA, but the shares have kind of stalled out over the past six months.

They have. I think it's something to watch into next year. You wouldn't hold NVIDIA here, would you? No, too expensive for us. I figured, but I just... And also, sooner or later, there's, like Adobe, they're going to miss a revenue number, and there's just no room for error.

Yeah, no, well said. Seema, thanks. Appreciate it. Seema Modi. Baseball star Juan Soto is just moments away from being formally introduced as a member of the New York Mets after agreeing to a record-breaking $765 million contract this week. Coming up, we'll speak to the super agent who brokered the deal. Scott Boris will join us from Metfield?

What we put, Met Stadium? City Field. City Field. Thank you. City Field. Thank you. City Field. That's after the break. Welcome back to Power Lunch. About 30 minutes from now, four-time All-Star Juan Soto. We'll be formally introduced as a New York MET at a press conference at City Field.

Late Sunday, Soto agreed to a record. breaking $765 million $15-year contract with the Mets, and we're joined now by the agent who got the deal done. The superagent Scott Boris and CNBC.com's media and sports reporter Alex Sherman joins us as well on set. Mr. Boris, congratulations above all for negotiating this complicated and blockbuster deal. Thank you so much. It's really been a pleasure to work for Juan Soto, and we're all quite honored by it.

Well, let me ask you this. there was another deal on the table from the, from the crosstown rivals of New York Yankees. What was it? What were the one or two things that differentiated and caused Juan Soto to choose the Mets over the Yankees? Because the difference in face value of the deal, as reported, was only something like $5 million or thereabouts over a period of 10 to 15 years. So I can't imagine it was only the money. What was it? I think the perception here is really kind of misstated. This is about multiple teams. And the totality of Juan's decision involved far more than one other team in New York.

I mean, I think Juan has great respect for the Yankees. They're a tremendous organization. And in every way, did everything to illustrate to Juan in this process, as did other teams that they really coveted who he was as a player, what he meant to a franchise current and long term. This decision wasn't about one other team. It was about multiple teams where Juan and his family had to sit down and make a decision over them.

So quite right. I mean, we hear reported Toronto, Los Angeles, Boston, were among the other teams involved here. But I'm having a hard time figuring out what you're trying to say here that it had to do with other teams. In what sense, then? I mean, I don't, it seems like you're being elliptical.

I think when you're an athlete. No, when you're an athlete, you think about all things, but you primarily also think about your routine, your performance, your family, in addition to the economics. You know, Juan Soto's performance levels in City Field are well known to him, and he plays at the highest level of his baseball term called OPS. He plays at the high. highest levels of performance.

And players think about execution. They also think about ownership and winning not only in the current but the long term because the deal is so long. You think about the impact on your family. You think about all these factors. And when you're given the privilege of having so many teams offer you opportunities that are, as it turned out, we're in a range of record-setting contracts. You look at the internal aspect of that where you say, I have to execute.

I want to win. I want to know my ownership. What does my family feel about this decision? So there's vastly more things that you think about other than economics. That's very interesting. I think we just learned something in it particularly, and you're famous for this, by the way, for assembling a package of statistics and analytics that make the case.

And you just said that one of the variables here, or the important decision points was how he performs at City Field. Alex, jump in. Yeah, the size of this deal, Scott, is so massive. I'm curious, you speak to executives and owners around the league. Is there a sense that you feel of a growing discontent among some of the owners and executives from a parity standpoint, that these deals are just too out of whack right now? We've got the CBA coming up in 2026.

Do you sense that there may be some motion toward trying to push for a lockout and a salary cap? No, and I'll tell you why, that we've experienced this many, many times in the traditions of baseball, is that these teams are well studied. They're very well versed. When there is something of value in the marketplace that you have a rare opportunity to acquire, where we have an element in the sport called surplus value, where there has never been a player who has had a surplus value that exceeds well over a billion dollars.

And each team knew that this asset, this benefit to a franchise, was something that was not going to be available for years to come. And there's a rarity to this. I call one a centurion. And he's one of the few players that in a century meet the mark of performance, value at such a young age. So this is really about good business decisions. And you can see that from the fact that when we started, there were close to half the league was wanted to participate in this. And we reduced that.

And in the end, we had difficulty reducing the numbers because so many teams were seeking this rare value. because in the end, it was just good business to a part. Let me bring in Chris Grissanti with a question. Scott, looking at it from a market perspective, you and your client basically just climbed Mount Everest, the Mount Everest of Professional Sports. So my question, you got Bitcoin hitting 100,000. You have other symbols of what I frankly would call excess.

But do you think you'll plant your flag, and this will stay there as the record for five or 10 years? Or do you think we're on the way to more, contracts like this? Great question. And I think we have historical models that give us an example of this. I remember when I did Alex Rodriguez's contract back in 2000. His 252 number exceeded all sports by far, a doubling. And everyone asked the same questions. You can view it as ownership saying there's rarity in every business. There's rarity certainly in sport. This certainly creates an umbrella as to how those aspire to really climb to the shade that that Emperor Vela provides. It was a

very slow process. In Arod's case, he himself, after seven years when I did the contract with the Yankees the second time, only he elipsed the mark that he had made. And I think it was well over a decade before someone came to those levels. You know, Scott, the rarity of skill in the youth really make these things something. One difference, though, I see between A-Rod and today, and it's going to become more of an issue in the years to come, is that the regional sports network model is crumbling. And that's going to affect the revenue that's coming in for quite a few of these major league teams. Maybe it won't affect the billionaire Steve Cohen's out there, but it's going to affect a bunch of them.

Do you feel like that may have downward pressure on some of these salaries? You know, Alex, when you are the product and the product is coveted and there is demand for the product as there is in sport, it's the ultimate mystery. The production cost of it is it's so minimal. So the reality of it is how it's distributed and the cost or value of it in negotiation is something that is the issue. It's not the value of the content or the product. So sport is very stable. It's recession proof. We watch it.

We demand it. We have a historical equivalent for it here. And so the product is not in any way in question. It's merely how we create a value structure and a process to determine its distribution and how the owners, the union, and everyone involved in the sport really create methods to optimize how they take the product and the content and market it. That, I think, will answer all questions because we know historically that this is a coveted medium and it's an exciting medium. and for those of us who spent our life in the game, we see promise and we see extraordinary talent, and we see the true mystery of the game beholding to audiences

that really covet to watch it. Scott Boris, thank you for your time. Arguably, no one, no one understands baseball and the business of baseball better than you do. Thank you for your time today, Scott Boris. And Alex. I appreciate that compliment. Thank you.

You're very welcome. And it's 2024. a four years and end. 2025 should be an exciting and challenging year for Wall Street. Simmering geopolitical tensions, economic uncertainty, and new administration in Washington, could have caused some market turmoil? Could that mean a return to dividend investing for some quote-unquote safer returns? We'll explore that in-market navigator next.

Welcome back to Power Lunge. I'm Kate Rooney with your CNBC News Update. The Justice Department and City of Louisville, Kentucky, announced an agreement today to reform the city's police department in the wake of an investment. prompted by the police shooting death of Brianna Taylor. The probe found a pattern of discrimination and the violation of civil rights against the black community. The consent decree still does need to be approved by a judge.

Meanwhile, a Missouri man found in Syria telling NBC news today that he spent months in a prison there after crossing into the country for a pilgrimage to Damascus. Travis Timmerman went missing in Hungary back in May, re-emerging in Syria after rebels freed thousands of detainees from prisons after toppling the Assad regime. And finally, BuzzFeed announced today that it is selling. First, we feast. That is the brand behind the popular YouTube show Hot Ones, where celebrities try to answer in-depth questions while eating hotter and hotter chicken wings. The all-cash deal to a group of investors includes Hot One's host and co-creator Sean Evans. It's valued guys at $82.5 million. Kelly, back over me. I always thought

Tyler would be the perfect guest on that show. It's not too late. We should recreate it here. I could never do it. I would last eight seconds. Kate, thank you very much. We appreciate it. Let's move along to Market Navigator today

with stocks broadly lower down about half a percent after we saw rates back up on the back of today's PPI number. And with markets kind of broadly trading at high valuations, is it time to get back to basics? Our next guest says dividend investing could make a comeback in 2025. He's going to tell us how to navigate that space in which specific names he's eyeing.

Here's a little peak. Matt Powers joins us, joins Chris and I. He's managing partner at Powers Advisory Group. Matt, I didn't even realize that Costco paid a dividend. Welcome. Hey, thanks for having me on. They do, just barely, but they do pay a dividend. So, but to your point, I mean, a lot of times people look at dividend stocks and look for the

little bit higher yielding ones. Then we have to have a conversation about the safety of those companies. So tell me about the dividend screen that you're running and who's popping up on it and why. Sure. So we invest in a lot of different asset classes and strategies, but our core focus is dividend growth. And, you know, we really right now that we see three factors that come into play going into next year and, you know, rate cuts, cash on the sidelines, and market rotation and broadening. We think the feds continued easing should have some influence on the dividend side next year. Historically, dividend growth stocks have outperformed after initial rate cuts

from the onset of cutting cycles, the median 12-month return of dividend growth equities is over 7% compared to 4% for the S&P 500. And, you know, cash on the sidelines. You can talk this a couple different ways, but assets and money market funds have continued to grow throughout the year, and it's not a mystery that investors have been taking advantage of elevated rates with low risk. We see a possible shift, and, you know, to the dividend equity sides, a relatively conservative way to gain exposure and rotation.

MegaCAP's been to talk for two years. We're not saying move away from this area, but there's expected slow growth in earnings. This might lead to a shift towards underperforming sectors. But bad. So, for example, Costco is a great example. Where does valuation come into your program there? Costco's already up 50% this year.

It's trading it, I don't know, 70 times this year and, you know, 50 plus times next year. And so why doesn't that stay your hand? So it's a good question. So we normally, we're looking for a 2% yield on a stock. Evaluation typically comes into play. Costco is kind of unique in this. And the reason I pulled that is it's timely for two reasons. They report earnings after a close today for one.

But it's one of the dividend growth names that we follow, Kroger, which is hitting all the headlines. They tried the acquisition of Albertsons. It fell through. And they made clear they're doing that to scale to compute. with Costco, and for that matter, Walmart, Amazon, who still dominate the narrative. So they're unique. They report sales monthly, so we're looking at the earnings as part of this, but it's not an ideal

entry point on them, and we think they're accurately priced, but a great long-term holding. If they miss today, I'd consider buying on a pullback or just pay attention to pullbacks as an entry point, mainly because of their current valuation. Thank you for explaining that because we were both scratching our heads. Prologis and UPS are a couple of more stocks you're looking. at higher yields in those UPS around 5% as well. Matt, we'll leave it there. Check back in soon. Thanks for your time. Appreciate it today. Okay, thank you. Matt Powers. And Chris, when you hear kind of dividend investing, what does that mean to you? I mean, I like the people who've explained,

it's not just about capturing the income, which a lot of people reinvest. It's about the financial discipline it forces on the company. Sure. So we think it's a terrific indicia of a high-quality company that they can increase the dividend consistently because that means they're confident in cash flows, not just today, but going into the future, too. So Costco, clearly a great thing. My question for Matt is, well, what would make you not buy it? A hundred times earnings? 150 times earnings. So that's, again, getting back to the point at the beginning of the show, another indicia of exuberance. And that scares. And even he said he's looking maybe to add more on a pullback. If we get one percent pullback at this point, it's usually all we get.

Tyler, back over to you. All right, Kell, still ahead. Gen Z to the rescue. Many of America's shopping malls are struggling to keep the doors open as e-commerce grows, but new research finds younger shoppers actually crave the brick-and-mortar mall experience as much as their boomer-grandparent. What do you guys say here on the floor? You guys are kind of Generation XE nod, yes. Like the malls? Not like the malls?

Thumbs up, thumbs down. Eh, I'm getting it. Thumbs up. We'll get the full story. We'll poll the floor next. Welcome back to Power Lunch, everybody. If you're heading to the mall for any holiday shopping, you may notice a lot of teenagers. Despite being raised in the Internet age, Gen Z apparently loves the mall.

Melissa Repco joins us now with part two of our series on The Future of Malls. Melissa. Hi, Tyler. As teens and 20-somethings look for ways to socialize and moments to post on social media, they're heading to the mall. Gen Z, which spans from roughly ages 13 to 28, shops in person about a as much as their baby boomer grandparents, according to a survey by the International Council of Shopping Centers.

And according to a survey by EY, nearly 63% of Gen Zers plan to make holiday purchases at stores. I spoke to Gen Z shopper, Lindsay Hymes. Here's why she said she's shopping at the mall. It's actually more convenient for me to just go to the store, try on the item if it doesn't fit, I could just return it right then and there. Instead of having to go to UPS, send it back,

waiting another five to seven business days. Mall owners and brands are working to attract shoppers like Hayams. Abercrombie and Fitch-owned Hollisters organized pop-up concerts and autograph signings at its stores. Bath and Body Works has added videos and scent bars at some stores, specifically with Gen Z in mind. And mall owner Simon recently launched a marketing campaign aimed at Gen Z with ad spots running on YouTube and Netflix. But those companies have competition. Some of Gen Z's favorite brands are outside of the mall. About half of Gen Z shoppers said in a survey that they most frequently show.

shop at discounters and off-priced retailers like T.J. Max and Walmart. They also like to shop at thrift and dollar stores, Kelly and Tyler. So not just the mall. A lot of other places in person, too. And even the brands, Chris, I mean, these are the same companies from the night. And it's interesting to watch the stocks like Abercrombie was at an idea for so long. And now it's, you know, making a comeback. And so many of these, I think it's because these Gen Zers aren't old enough to realize how bad malls were back then. How scary. We were so happy to get the internet, so we didn't have to go to malls anymore. Well, they're different now, I guess.

Right, right. They're a little bit more safe. And I like actually said, you can just go and return it the same day. Something you try out. Trying things on is also a pain. Costco reports tonight, Melissa, while we have you, and we're talking about the valuation. What are the expectations for the comps? Do you know offhand?

No, I don't have those offhand, but the two, or there's kind of three things that I would say I will be listening for. One is, of course, any early holiday insights. That is going to be really of key interest of investors. The second thing is, this is the first. quarter since Costco raised its membership fee. That annual membership fee went up in early September. And so this is the first time when they'll start seeing people roll off and then roll up to that higher amount. And it was seven years ago when they did the same membership hike. So it's a notable change. And then last but not least, because the stock price is so high, every little change

they make gets a lot of scrutiny. And so they made recent changes to rotissory chicken packaging. And that got a lot of blowback from customers. The bag? The bag? They switched. the plastic molding container to a bag. And some people were saying it was kind of dripping and just not the same. And so something like that and then also their additional membership card checks are little friction points that could turn off shoppers.

Again, when the price is so high, these little things could tip the needle one way or the other. The other unique factor is a year ago was when they started selling gold bars online for the first time. And so those were very popular selling out sometimes within hours. And so that makes for tricky

year comparisons this year too. Although some say that the membership crackdown, so to speak, could have a Netflix-like effect. What are they doing? Checking at the door more closely? Yes, exactly, because they were trying to prevent people from sharing those membership cards. Well, they scan. That's your picture. Oh, you got to match your picture. Yeah. A lot of people were free riding. I know. See what I'm right. Yeah. Look at Kelly's car. Very old. I do a, did the delivery this morning and was watching the prices because it just seems to just keeps creeping up. But in any case,

we were talking about with the valuation. It's a high bar, but it's a bar they seem to keep it. Also, there's an Adobe issue here because the expectations are just so high that even if they meet them, it might be sell on the news. So it's an embarrassment of riches, but it's been a great stock. Yeah, one of the great companies. Absolutely. The pioneer of the Amazon model. Good to be Costco. Yes, it is. Alyssa, thanks. Thank you. The 10-year yield ticking higher after a hotter than expected reading on wholesale inflation in November. We'll go to Rick Santelli for more of a.

for a read on the bond market next. Welcome back to Power Lunch. Some more hot inflation data this morning. The PPI came in hotter than expected after yesterday's CPI did so as well. But it's not really moving the odds of a rate cut next week, although it is moving bond yields, broadly speaking. Let's check in with Rick Santelli out in Chicago for more on this. Afternoon, Rick. Good afternoon.

And indeed, you know, the Fed has its thumb on the short maturities, or at least affect short maturities with its overnight rate movement. And of course, the longer dated treasuries are kind of market driven, even though they do have things like QE. But when we talk about inflation, it definitely goes right to the long end and the longer maturities. Look at a chart of PPIX food, energy, and trade, and realize that in November of last year, it hit its cycle low after the highs that were made at 7.1% in 2022. It came down to 2.5 a year ago. What was it today? 3.5, 100 basis points higher. You know, we use the term sticky sometimes.

That's not sticky. That's getting hotter. And how did it affect the markets? Well, it depends what maturity. Here's twos, tens, and thirties. All the next three charts are together. You can see the two's been a bit lazy, whereas the tens and thirties have been more aggressive,

and if you opened up to a two-day, really jumps out at you. As a matter of fact, if you look at the entire week, Tens and 30s every day since Friday make higher highs in the previous days yield. Two-year kind of sideways for the most part, and that speaks volumes about what Kelly, you just said. The Fed, it's baked in the cake, a quarter point, and we're getting to the point where nobody's going to be able even talk the markets out of that because it's already in the hopper. But it's showing up in the markets as well, and ultimately, whether it's going to be the inflation or lack of weakness in a fast fashion in the level, labor market, the long durations are going to keep the Fed honest here as they continue to be firm.

Tyler, back to you. Rick Santelli, thank you very much. And be sure to follow and listen to the Power Lunch podcast wherever you go. It's available wherever you get your podcasts. We'll be right back with final thoughts from Chris Grisanti. Welcome back. Let's get some final thoughts from our guest host Chris Grisanti of MAI Capital. You know, Chris, earlier in the year when you just casually said, hey, why don't I look at a stock like Hershey?

Little did we know how much of a battleground this name would become between chocolate prices and now this offer. Who is it, Mondalese? Right. Made an offer that they rejected. So what's your thinking on it now? So I think the Montalese thing is a classic example of if the public markets reject a stock and keep the price low, that a private buyer can come in and value those assets. So that's a classic value situation.

So now that stocks back down almost to where the rumors started. And I see no downside here in the sense that maybe something happens and you make money right away, or maybe they fix it and it takes a couple of years and you get paid a decent safe dividend while you wait, and while Hershey's at is at its lowest multiple in like 20. Doesn't Hershey's have a complicated management or ownership structure? Yes, it does, Tyler. So my thought there is, so some folks say, well, that means takeover is impossible. I don't think that's the case.

They're really suffering now, though. So I think a buyer can come in and say, hey, There's a decent claim that we're worth more for the trust than the current management and the current business plan. So that may get some reception ironically because it's not doing so well. But let me really shift quickly because... Well, that's actually a good way to shift, which is to say that you don't think this market is necessarily kind of fairly valuing everything. So Hershey's on one side, but in a concept stock would be in another, something with no earnings, no revenue. And they're going through the roof night now in some cases.

What I'd want to point out to your viewers is that the Trump administration right now, is the ultimate concept. They haven't taken over yet. They haven't increased oil production, et cetera, et cetera. And they'll have to deal with real life tariffs and balancing a budget and maybe deporting low-cost workers. And those are real issues. I'm not dumping on that in particular. Every incoming administration gets this halo. This is the honeymoon period. This is the honeymoon. And so be wary with the stock market going up on the incoming administration. It gets harder from here. Exactly. Chris, thanks for a great hour.

Yeah, we're Tyler. Chris Guzanti. Thanks, Kelly. And thank you all for watching, Powerline. Closing bell starts right now.