Power Lunch - Can Harris’ Momentum Continue? 8/22/24

Episode Date: August 22, 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.

If you could only see what just happened right now, offset. Welcome to Power Lunch alongside Kelly Evans. I'm Dominic Chu. And coming up on the show, we've got on one side of the CapEx coin, many experts seeing a spending boom on the way for industrials and materials sectors. Now, on the other side, some semiconductor stocks are announcing CapEx reductions. We're going to take a look at the CapEx conundrum, Kelly. Plus, we're climbing the social ladder.

In 2016, Donald Trump reinvented the campaign. campaign game thanks to Twitter and Facebook to some extent. This election, Kamala Harris is dominating the social media front. We'll discuss further ahead. All right, but first to check on the markets overall with the Dow sliding now more than 300 points at this stage. Traders are bracing for Jay Powell's big speech coming up from Jackson Hole, Wyoming. The S&P, by the way, down one full percent. The NASDAQ down one and a half percent, Kel. And some key earnings movers to highlight. Peloton shares are climbing as its turnaround plan takes hold. They're up 36 percent to around 450 a share. Advanced auto parts, though, down 16%.

Snowflake down 13% as well after their results. We'll trade those names shortly in three-stock lunch. Plus check out right now what shares Pfizer and Moderna are doing. The FDA is providing an update, approving an update for COVID vaccines as the virus surges. The details further ahead in the show. Right now, Moderna shares down 4.5%. Pfizer down 1.5%. But let's begin with the markets, some worrying signs around the consumer that are continuing to emerge.

the sales struggles related to home improvement stocks with Home Depot and Lowe's, William Sonoma following suit today. Clothing retail holding up slightly better, but signs of softening are still there. But market signals are still relatively bullish. More than 90% of the stocks and the S&P broke their 10-day moving averages this week, so shorter term things are looking okay. Here to discuss more of this is Kevin Mon, the chief investment officer of Henyon and Walsh, alongside our own Mike Santoli. This is an interesting, development, and I feel terrible because we keep saying it's interesting, because it seems like this is the same thing we have over and over again, that every time there's any kind of a pullback whatsoever, it seems to be bought, and not in an enthusiastic way, but good enough to keep the markets

going higher and higher. Mike, maybe we'll start with you on just what kind of a setup in the, it hasn't changed. It doesn't seem like over the course of the last year. Not much. And I think what happens when you have a short pullback like we did just have nearly 10 percent, if you look at intraday high to low on the S&P 500, is it's an opportunity for traders and investors to say, what's changed? Has there been a 10% swing in fundamentals? Seemingly not. I think the rebound has been broader and steeper than most would have expected, probably than I would have expected. We came within 1% of the old highs. And it came alongside, I would say, over the last couple of days, just this pile up of data points and observations that had the bond market really going far

down the path of this is a dovish scenario. We think rate cuts more and sooner. Whether we really want that or not, whether we really want the economic conditions that would bring that about, totally unclear. But as Powell waits tomorrow to speak at Jackson Hole, I think that today is a little bit of a step back from that ultra-duvish yields down, dollar down, oil down, small-cap stocks up that we had yesterday. So I think it's regrouping ahead of it. Kevin, has it surprised you is at all as an investor, a chief investment officer, about just how quickly the story has shifted from, oh, my goodness gracious, it's the worst inflation in 40-some years. And now we're all seemingly worried about whether or not the jobs picture is weakening and that disinflation or deflation

may be a worry in the coming years. Yeah, if you look over the short term, there's still a great deal of uncertainty about what the Fed will or won't do next. In the camp, that in all likely they're going to cut by 25 basis points in September and likely revert back to their March stop plot shot, which showed three rate cuts of 25 basis points each this year, another three rate cuts of 25 basis points each in 2025, and yet another three rate cuts of 25 basis points each in 2026. If, in fact, that's the case, and we take a longer-term view, if rates are lower, if yields are lower, if inflation continues to moderate over the next two years, well, that provides some pretty strong tailwinds for both. stocks and bonds for investors to consider.

Although it's interesting to contemplate at this point in the cycle, we were talking to Michael Darta last hour, Mike, and he was talking about how the Fed needs to cut by 50. Inflation expectations are down by 60 basis points since earlier this year. And I heard from some bowls after the segment who said, I don't always agree with him, but I think he's right this time. But there's no way the Fed is cutting half the point. I don't know if there's no way they go 50. I think that probably shouldn't be your assumption.

I think the market, as of yesterday, was pricing in a 35 basis point decline in September. So it was splitting the difference between a 25 and a 50. I guess I could understand the argument for 50 because if there's going to be a 50 at some point in the easing cycle, you're starting with more than 525 right now. And so therefore it's a smaller, you know, proportional decline. And also it's a gesture that says, look, we're starting a new process. We're acknowledging that rates up here are restrictive. Inflations falling farther than we thought it would at this point.

Let's get going. I don't think it necessarily has to be or I do think the market wants an understanding. that we're going to narrow that gap between where rates are and where inflation is, and you have to have a high sensitivity to whether the economy hangs in there along the way. To me, the bulk case, for two years now, has been inflation will come down faster than the economy will weaken. That still remains the case, but we seem like we're kind of have a moment of doubt around that. That's where they're converging. But the doubt is kind of key, because you have this conversation that's happening in certain parts of the kind of macroeconomic sphere

about whether or not Americans would be better off having a slower growth and perhaps even job-losing environment, as opposed to having a job with wage gains that are more moderated, but having their wages eroded by the effects of higher inflation, right? And so there's this weird line that you have to straddle. But I wonder, Kevin, if you go 50, that also kind of signals, hey, that holds that. that things are maybe not as good as we thought they were, right? And that could send all kinds of reverberations through the market. Yeah, I believe the Fed is more concerned at this point with the pace of this economic slowdown,

potentially, and I underline potentially turning into recession, than they are with inflation staying above 2%. Look at their last summary of economic projections. They forecast core PCE to not return to their 2% target until the end of 2026. Yet they're still forecasting 225 basis point in cuts between now in the end of 2006. So if they're so determined to get inflation back to their 2% target, why would they be cutting interest rates by that much prior to getting back to their 2% target? I believe unemployment hitting 4.3% after that last jobs report, keeping in mind that their year-end forecast was only 4% concern them. And we, of course, we do have another jobs report before the September

Fed meeting. So you have to believe that Powell's going to acknowledge that data can come along and change the equation after tomorrow. But, you know, Kelly, you talk about late cycle. I been in that mode. I mean, look, when unemployment starts to go up, you're kind of late cycle. On the other hand, earnings growth has just picked up for the majority of stocks from like flat to negative toward positive. So it's very much like asynchronous. All the different elements of this cycle seem like they're not really in line with what we come to expect. And Steve Leasman has been talking about that for a long time. When we first started to see the kind of post-pandemic pullbacks, it started an industrial and then we kind of got the housing weather. And now we're still in this,

and I don't know what that means for the typical behavior. of stocks either in a normal cycle or in this one, where people say we've been in an industrial recession, but not a consumer one. Yeah, what I will say is what's encouraging right now for the third quarter, we're tracking to have those other 493 stocks outperform the MAG 7 for the first time in nearly two years. That broadening in an expansion of the rally is important. That's being led by an expansion and earnings growth. That will only be further accelerate once the Fed starts cutting interest rates provided they do it on a gradual basis with no emergency cuts or cuts of 50 basis points are greater.

It's like the early cycle. Like we're starting all over again. It's like it's a reset button. Did we never had a recession but we're restarting the business cycle or we had an end- I can't figure it out. I mean look at, well, there's the first bull market to ever start while the Fed was still tightening. That's interesting.

So you think about how all, it's just nothing, nothing really worked in terms of the playbook. Wow. All right. Kevin Amon, thank you very much. Mike Santoli. Thank you very much. We could go on for hours.

We should do a podcast. Oh, no. Let's go for a macro to me. micro now. It's time for today's three-stock lunch. Here with our trades is Bill Strzullo from Bell curve trading. Bill, welcome. And let's start with Pellett. Let's go super micro. Peloton returning to sales growth for the first time in nine quarters. They beat results. Had a mixed out look for the year ahead. Simeon last hour just said they need to really focus on bringing expenses down if they want the shares to go much higher from here. What's your take? Yeah, Kelly, I think the

stock has more room to run on the, at least in the short term. I'd buy it from 385 to I think you'll go back to $455.55. And I think you can push this to $5.55.75. So in the short term, it looks good. It looks like you finally have some people caught the wrong way here, meaning maybe a little short underweight. But in the bigger scheme of things, the structure is, technical structure, is really problematic. You put in a high at 17109 in January of 2021. The average person who is still long the stock is long of the 90s. So you've got people who are way offside in this name. And so any sort of sustained move higher, people are going to sell into. So short term, again, I think you still have more to go on the upside. Bigger picture. I don't want to own the name.

You know, trading's not like diving or figure skating. You don't get extra points for level of difficulty. And so here, even though the short term may have more ups, the long term structure to me is very problematic and more than likely Peloton is going to go sideways for a long period of time to clear out those bad long positions. All right. So that's okay, it's a very valid view to have. Let's talk about the consumer front still because we're also Bill talking about advanced auto parts slashing its sales and earnings guidance, citing lower discretionary spending. Again, it wasn't that long ago. Pan pandemic, everybody had to fix up their cars and they were going to go and spend all kinds of money at advanced auto parts and its competitors. What's what's giving now?

Yeah, similar story here, Dom. I mean, you, when these, you have these stocks with these meteoric rises and these big falls, it's really difficult to kind of recover their bullish momentum. I mean, advanced auto parts topped out at 224 in change in 2022. You look at the average person who's long the start. There's still long around $140.40. a share. It's over $100 from where we are right now. And so I still think there's more to go on the downside. And this name, I'd want to get short from 63 to 57. I think you trade down to at least $40, $35 before it's over. But again, it's another one of these situations where you had this big significant move to the upside, equally dramatic move down. You have a big overhang here, what we call

the bell curve top heavy, a lot more bad logs in the market than bad shorts. Those bad logs haven't been cleaned out. I think you go to at least $40 to $35 before you start to find some stability here. I love this mental model, not least because I was cleaning out the house all morning, Bill. So I'm totally tracking. So you think advance could be have more room to drop. Let's see what you think about Snowflake, which that one's down after topping results and boosting full year guidance today.

But there are signs of decelerating growth. It's down 13 percent, down 23 percent in a year. What's your take? Same thing. I mean, Snowflake is actually probably in a worse situation. As you said, Kelly, they beat second quarter earnings and revenue, lifted full year guides, and the stocks getting absolutely pounded. Not a good sign. And again, I think if you look at the long-term structure of all these charts, they're all the same way. And Snowflake's no different. I mean, you had a high a 429 in December of 2020.

The average long position is around 220. So again, people are way off size here. What I'd like to do in this name, I'd like to get short 122 to 127. I'm looking for move to 113, 100, and at least down to 90. So, you know, all of these, basically, these three names kind of fall into the same category

where, you know, markets balance two ways. price of time. And all three of these cases, I think you need to go sideways for a long period of time, work off the overbark condition before they can do anything meaningful on the upside. All right. There you go. Three stock lunch for today. Bill Strasulo, Bell Curve Trading. Thank you very much. We'll see you soon. Take care. And still to come. Check out Wolfspeed. The stock all over the map, down 3% now on results after the bell. But it was up 8% on the open. It's now lower again. We'll dive into why and what's going on next. That could be company coming.

So here's the story and the insights into each sector. And we've got Pippa Stevens for one of them and Steve Kovac for the other one. And Pippa, we're going to start with you with regard to kind of how things are shaping up in industrials and materials. Well, the infrastructure theme is certainly not a new one, but we could be on the verge of an old school CAPEX boom, as Bank of America put it. It's being driven by three distinct themes. Security and better control over supply chains. protectionism, as well as the new economy, which includes AI and data centers. Now, industrial and material stocks are direct beneficiaries, but they've lagged the broader

market as well as the tech sector this year, and industrials are now trading at their cheapest valuation relative to tech in more than a decade. In the last six years, for every $1 invested in U.S. tech companies, just 12 cents went to industrial's infrastructure and commodities funds, according to B of A. Now, names to watch include Emerson Electric, Martin Marietta, Material, and Materials, and Freeport McMurran, all of which have an average street target that's at least 20% DOM above where they currently trade. All right. Well, Steve, what are you seeing in the chips? Yeah, so let me go back a little bit because the theme of this earning season was just all that massive CAPEX.

We're seeing names like Google and so forth pay for artificial intelligence. But two chip names are reversing that trend. That's Texas Instruments in Wolfspeed. And Texas Instruments this week said it's going to cut CAPX, $2 billion, to $2 billion from $5 billion in 2026. sales come in at the lower end of their guidance. But they could still spend that $5 billion if they beat their own expectations. Now, this is an unusual move for TI. Usually they don't put out this kind of stuff so early, but it's coming after pressure from Elliott management, an activist investor, to keep up strong cashful at the company. And of course, Elliot praised the announcement this week. We'll speed a little bit different, but also committing to cut

CAPX, knocked off another $200 million for fiscal 2025, expecting up to $1.4 billion now, which is lower than the $2.1 billion it had in 2024. But it says CAPEX is going to fall even more in 26 to just $600 million at the most. Now, shareholders rewarded both names this week. Wolfspeed is up about 7% week to date. Ti up about 2%. And this is the opposite story we've been seeing from Big Tech, Microsoft, Google, and Amazon. Those shares were largely punished after earnings because they said CAPX is going to increase to build off their AI ambitions. Apple is the outlier of the group, they're spending relatively little, about 2.5% of sales, according to Moffat-Nathson. And that's compared to its peers, of course, spending a lot more than that. We're just going to

see how that CAPEX picture really impacts, because Nvidia is the one next week. That is the one that is the one. Everybody wants to know about that. And they're the beneficiary of all this CAPEX. I wonder, so if we talk about the way that maybe investors are viewing the overall CAPEX picture, is it about now this growth slash, you know, investing balance that tech has had to strike because of artificial intelligence? Or is it a focus now more, PIPA, I guess, on your side of things, about this idea that if they are spending, it is because they have a reason to and it's they need to grow. And that's the reason why we're doing it on the old world value side of the equation. I think that's it that we've seen so much momentum and this already, you know,

being priced in kind of the upside from AI. But that's still further down the line. And in some cases, it's almost putting the cart before the horse because you have to actually build it out first, and there's been so much interest in the cloud and tech and AI, but what about the stuff that actually makes all of that run? And so that's what Bank of America is saying, and others as well, that you have to focus on the companies that provide the materials, the cement, the wiring, the cooling infrastructure, H-FAC, yeah, all these very unsexy areas, but they're the ones that actually make it come to life. And those areas of the market have been overlooked amid this big boom in tech investing. I just wonder, Stephen, maybe you can add some color of this

or not, but all of this is with this idea that there's going to be a massive payoff. waiting for these investments. And as people become, like, wait, well, what is Microsoft's uptake of these? You know, I- That is exactly. And that is the big question. We heard it again and again on these earnings calls this entire season. Okay, you're spending these enormous amounts of money, you know, $19, $20 billion a quarter on capital expenditures. When are we going to see a return?

When are we going to see revenue growth? The answer from pretty much everyone is we don't know, but we know the demand just keeps accelerating. In Microsoft's case, they say we literally can't keep up with it. We just don't. They're offloading stuff to all. Oracle now because they just don't have the capacity to do it. Wow. That's incredible. So the demand truly is there. You talk about the cart before the horse. I mean, it's already there. Like, they don't need to even worry about that. They don't have to prepare for anything. It's here. It's happening. That's what

they keep saying. I'll go back to what Alphabet CEO Sundarbichai said. He said he'd rather overspend than underspend. He'd rather make the mistake and spend too much on all this because of all the demand they're seeing. So that's, it's a very different story than what you typically see. You know what they called that back in the day? They used to call it. Well, it's not just that. They used to call it the field of dreams trade. Oh, really?

If you build it, they will come. That's the whole idea. But it's already coming, I think, is what we're hearing. It's not hoping they'll come. It's kind of already here. But for AI, it's whether or not you hope they will come after the AI has been put in place and all the infrastructure is built out. And that's the whole idea behind why you have to spend on that.

And Pichai's argument is, hey, if I overspend on all this stuff, there are other things we can use that infrastructure for. You didn't really say what. but there's, you know, there's... It won't go to waste. It won't go to waste, isn't you saying? Thank you both. Appreciate it.

Pippa and Steve. After the break, speaking of chips, we'll dig into options, opportunities in that sector. With NVIDIA reporting just around the quarter, market navigator is next. All right. All right. Welcome back to Power Lunch. A quick check on the markets right now. The Dow industrials are currently down about 211 points.

That's off the lows of the session. It's the outperformer down one half of 1%. The S&P 500 is down three quarters of a percent. 5577, 77, the last trade there. And the NASDAQ composite is the real underperformer off nearly 1.5%. But again, off session lows. The composites down 243 points to a level of 17,675. Meanwhile, in today's market navigator, as we prepare for Nvidia's big quarterly report next week,

one trader is actually seeing a bifurcation in the semiconductor sector. We got winners and losers, more clearly emerging. And he's looking at a secondary way to gain in profits with perhaps some less volatility. Let's speak now with Brian Stutland, portfolio manager at Equity Armour Investments. He joins us in Brian. You're using a two-step process to play what's happening to the upside with one stock in particular. What is that stock in semiconductors and how are you playing it? Yeah, I think when you look at the whole sector here, right, when we have the sell-off in the markets, the semiconductor sector sold off pretty hard, but it actually is only recovered about

50% from there. So when I look at SMH, It's about 50% retracement back from the all-time highs to the recent lows in August, whereas the rest of the broader market is sort of accelerated higher. But when you look inside that sector, some of those stocks have performed actually quite well. Obviously, Navidia earnings, and we're going to get some clarity with them next week. And I'll play that how I want to. But I think another stock that stands to benefit from this and the rotation within that sector of winners and losers is Taiwan semi, TSM. And when I take a look at that, that has earnings not until October, but,

Obviously, we have a couple of Fed rate decisions. We have election in November. We have its earnings. We have Navity earnings. All this is going to create some volatility for TSM itself. I want to add that to my portfolio. I want to lighten up the load on other areas that we've done for clients here, where I'm less involved in the global semiconductor index itself.

And I'm picking out particular names that I think are winners. And to do that, Dom, I want to buy a call. It's very simple, right? I go out to November. I'm looking at the 175 call, the $175. strike in November expiry. The stock we've traded a little bit higher earlier in the day. That call was worth about $12. It's actually a little lower now, so provide some good opportunity. So it is a little pricey, but there's so much movement to come here. I think there's a lot of uncertainty.

We've seen a lot come down on the Fed decision where that's going to take the markets. Semiconductors should move as a whole probably with the broader market as well. But this is a stock, I think, is a winner. It manufactures for Navidia and manufactures for AMD. It's going to have lots of play here in this whole AI space. And I think this is a name you want to own inside that sector. Now, Brian, before we let you go, this is all about risk management as well. What happens if the stock goes lower owning that call option or tends to rocket higher and you've got profits out there? How do you trade around that position? Yeah, Dom, I think that's a great question because it's one thing to put a trade on. It's another thing to manage. And if the stock were to move lower,

I would probably look to sell a downside put where I want to be put to the stock, right? Reduce the cost of the initial call I bought. At the same time, if the stock moves higher prior to earnings in October, maybe I want to lighten the load a little bit and sell an upside call against it. So I think by simply just starting with buying this strike call at the 175 strike, I have some room to trade around and be a trader in the market, sell some puts to the downside if the stock moves lower, sell some calls to the upside if it moves higher. All right, trying to define the risk out there. Thank you very much for the trade in TSM. We'll see you soon. Thank you. So Kamala Harris is set to close out the DNC tonight with her hotly anticipated speech.

We're going to dive into what to expect from the presidential hopeful coming up next after the break. Welcome back to Power Lunch. I'm Bertha Coombs, and here's your CNBC News Update. Former President Donald Trump touched down in Arizona about an hour ahead of a tour of the U.S. and Mexico border this afternoon. His visit comes one day before he holds a campaign rally in Glendale, Arizona, where he will try to paint Democrats as weak on border security. The U.S. envoy to the United Nations urged members to press Hamas to accept a U.S.-backed ceasefire proposal, saying a deal that would also bring Hamas hostages home, quote, now is in sight. Israel has agreed to the framework, and Ambassador Linda Thomas Greenfield said the council

should do everything in its power to get it over the finish line. And the Mexican government says it is preparing an arrest warrant against Joaquin Guzman Lopez, the son of drug Kingpin El Chapo, following his arrest last month here in the U.S. They're accusing him of kidnapping another drug boss, Ismail Edmio Sambada, onto an airplane bound for the U.S., potentially to sweeten a plea deal for himself. Mexico's Attorney General says prosecutors are still waiting for the U.S. to share the flights in the U. information. Kelly? All right, Bertha, thanks. It's the final day of the Democratic National Convention. Tonight, Vice President and Democratic nominee Kamala Harris will take the podium. As we count down to her speech, her policy plans are on display from regulation to taxes. Here with more on what to expect tonight and the impact on the business community is Brian Gardner,

the chief Washington policy strategist at Stiefel. Brian, it's good to have you. Big public reaction. Well, I guess if I'm on the sort of public who cares about things like financial gains, and sort of unrealized capital gains, big reaction to some of her plans. What stands out the most to you, the corporate tax rate? The corporate tax rate, you mentioned the unrealized wealth tax, the capital gains tax. You know, there's not been a lot of detail on the economic plan so far. This campaign so far has been about a vibe, an energy, a feel-good mentality, not about specifics, and that's by design.

But as some proposals are coming out, you know, there's a question. You know, is this the vice president, the candidate of 2020 and the senator from California, or is she morphing into something different? So I think there are a lot of questions about her governing style, her approach to governing and the policies that have a lot of concerns in the business community and on the street. What do you make of the fact that her poll numbers have slipped if you go on kind of the betting sites since last Friday when these proposals were first unveiled, even as there's been almost, I don't know if the word is record viewership of the DNC, but certainly higher than what we saw

at the RNC. What does that tell you? I think what it tells us is that the betting markets are looking past the current euphoria, right? Ever since the president Biden dropped out and Harris secured the nomination, there has been this surge of enthusiasm, kind of a relief rally among Democrats. And so that that has led the betting markets to reassess the race and thinking that she was probably, in their view, the favorite. But now we're getting to the end of the euphoria stage. We're getting into the next stage, what the policy proposals are, how she's going to respond to press interviews, the debate, and where she is in the polls. She's had a nice run. Remember, this race is essentially tied, and she's running behind where Clinton and Biden ran,

in their two campaigns. So I think the betting markets are seeing that this is a really tight race and that Donald Trump is probably in a better situation that people have kind of thought the last two to three weeks. I love when the relief rally terminology. And I in general think there's more that could be done applying financial market and almost like technical insights to political betting on. Political markets and economic markets, financial markets.

There's still markets. Yeah, exactly. Exactly. They're still made up of people who are placing their bets in psychology. influences that and so on and so forth. So what do you turn your attention to now then? Is it if there's further detail about their respective policy plans? Because that does seem to be moving the needle somewhat. The debates that will be coming up, so on and so forth. Yeah, I think it's all the debates. I mean, I think the Harris campaign has made a correct

calculation that voters aren't as worry or focused on specifics of the issues, especially stuff like a capital gains tax, a corporate tax. That is not something that registers with a lot of voters. What does register with voters is the economy more broadly in prices inflation. And she has tried to address some of that. That's a big challenge for her because she is the incumbent. And the incumbent party does not have a great track record on inflation right now. So how voters start to reassess her going forward? Potential press interviews to debates. I just think the debate is just going to be a, It's always big. It's going to be bigger than normal. Agree. Absolutely.

I mean, maybe the vice presidential is one as well. We'll see. Brian, thanks for your time. Appreciate it today. Thank you, Kelly. All right, let's stick with the political front. Many expect this political ad cycle in season. It could be a record breaker. It could become a huge boom and boost for local TV operators, which are struggling this year. But is digital media emerging as the prime battleground for these candidates?

Julia Borson has more on that emerging story about ad spending. Well, Dom, this political season will be a record breaker when it comes to advertising with a 29% increase in total spending and a big shift into digital ads, according to e-marketer. Now, Kamala Harris's campaign announced it is spending $170 million on TV ads and a record $200 million on digital ads between Labor Day and the election. This as TV spending is growing just 7.5% from 2020. levels, according to e-marketer, while total digital ad spending is projected to grow 156%. That includes ads on Google and Meta's platforms. And the fastest part of that digital category is connected TV ad spending. That's projected to grow more than 500%.

Now, with that growth, connected TV ads will comprise nearly half of all digital political ad spending. Hulu, Peacock, Paramount Plus, and Roku accept political ads. an ad tech company, the trade desk is benefiting as it sells those ads across those platforms. Now, the appeal of these connected TV platforms is the fact that over two-thirds of the U.S. population stream content, and these platforms offer far better targeting abilities than traditional TV ads. Now, when it comes to those traditional local television ads, the station owners are seeing increases. Next Star, Gray TV and Sinclair, all reported a second quarter boost

from political ad spending. And now they're all guiding to a record political ad season. Now, Trump's campaign has not announced his fall advertising plans yet, but so far it's worth noting that Harris is spending a lot more on digital media ads than Trump since she started her race. Dom? Julia, this is fascinating. This is the context. So stick around because now is the conversation. Former President Donald Trump brought social media to the forefront of politics with his posts on the platform formerly known as Twitter, now X, back in 2016. But Vice President Kamala Harris has been making waves across TikTok and X in recent weeks.

So just how important is that social media digital strategy to these elections? Joining us now is Lulu Cheng, Missouri, the founder of communications firm Rostra. Lulu, this is an interesting discussion that Julia has now framed for us. Is this going to be all about digital advertising? and targeted ads towards a specific demographic. Thanks for having me. I think the ads will be important. I actually think what will also be really important

on social media is the memes. The memes are basically a currency of social media where if you can put something out that people want to spread of their own accord, then you can get 10 times 100x,000 times more traffic and value out of it than an ad that people see once and move on. And I think Kamala's campaign has been doing a fantastic, job with the memes. I think that Trump is a little bit behind here, maybe because he's on

different social networks. He's not really on X. He's not really on TikTok. He's on truth social, which is not such a memey platform. So I would love to talk about how they're using the memes effectively. How would they use the memes effectively? I think about some of the memes that the Harris and Biden campaign before that have thrown up there. And then I look at some of the AI usage that the Trump campaign has used, notably most recently, once featuring somebody that looks like Taylor Swift. How does all this balance out with regard to how that message

resonates with the electorate? It's a great question. So the way I think of it is you can go on offense or you can go on defense with your memes. Kamala has gone on offense by creating a lot of funny new things

that young people relate to. So the original one probably is Kamala is Brat. I'm saying it brought like Brabors, but Kamala's brat. And that actually would not have worked for Trump. No one is saying Donald Trump is brat. No one would even say Biden is brat.

They actually have the right candidate that is very meme-worthy. Like, she's a meme-rich candidate to work with. And I think another way to use memes to your advantage more on defense is if someone is propagating an unflattering meme to really just lean into it and own it. So this whole coconut tree that was the meme that was trying to make Kamala look very kooky and unsurious, the campaign really owned it and made it into a kind of silly, endearing thing that people really like. Whereas this, I'm sorry to bring it up here, but I have to, this J.D. Vance couch meme, he has been completely unable to counter this. It's been incredibly sticky. It's still a meme. And they haven't

addressed it. They haven't fought it. One way would have been immediately to make a joke about it and kind defang the attack by owning it and making it silly, making it ridiculous. I feel like that's maybe what the Kamla side would have done. And they just haven't been able to do that effectively. So I think the main thing with Kamala's campaign is that they have a candidate who is able to take memes and turn them into kind of positive, silly things and take the attacking power out of them. Julie, as I listening to this, I think, well, these are also organic posts that the campaigns are doing. They're not ads in the traditional sense. So if I'm a Pinterest, I'm sorry, if I'm a Snapchat, maybe Pinterest too, if I'm a social media platform

that would love a boost from political ad spending, am I going to get it? Well, I think we have to really define our terms here. You're absolutely right. What we're talking about is memes that are organic. It's what we call earned exposure as opposed to paid advertising. And what's so interesting here is that, for instance, TikTok, which is, of course, a huge platform for all of the candidates and for those memes that Lulu is just mentioning, those memes went viral on TikTok. TikTok does not accept paid advertising. TikTok does benefit from all the engagement around those memes, but does not. accept paid advertising. So I think what's going on here is we're seeing a lot of engagement on all of the platforms, but not all of them accept paid ads. You know, of course, we've seen YouTube and Google and all of METIS platforms. They do accept those paid ads. But if you're talking about memes, that's about engagement. That's about what's going viral. There are some influencers who are accepting paid ads at the Harris campaign does not pay influencers, but some of the PACs do. So this is a really interesting and nuanced conversation, but at the end of the day, the content that is

appealing. That's what's going to go viral. That's exactly what Lulu was talking about with some of those different examples, like leaning into the coconut tree meme. And it's those conversations that are driving engagement across platforms, even if they don't accept political ads. We could, again, I got so many more questions, but so little time. Thank you very much. Lulu Cheng, Ms. Irvi and Julia Borson as well. We'll see you guys soon. Thank you. And coming up, the FDA just approved updated Moderna and Pfizer vaccines as COVID cases begin to tick upward. Stocks are not getting much of a lift, though. Moderna down almost 5% Pfizer 1.5.

Our Angelica Peebles will give us the latest next. Welcome back. Just mentioned some stock moves on Moderna and Pfizer. Some new FDA approval for vaccine updates. Angelica Peebles with the details. Angelica? Yeah, Kelly, the FDA today clearing new COVID boosters from Pfizer and Moderna. Both companies saying that these latest shots should be available at pharmacies within days. The CDC recommends everyone six months and up get a booster this fall. Now, these new shots target the KP2 strain that dominated earlier this year. We're already seeing even newer variants, but the FDA is still saying that these shots offer more protection against serious illness.

Neither stock really moving much on this news, reflecting some skepticism that people will actually get boosted this year. Last year, only about 20% of adults in the U.S. got the shot, and a lot of people have gotten COVID in this big summer wave. It's also worth noting that Novavax is lower all day and now hitting session lows. The FDA not yet authorizing their booster, the company telling us that they're working with regulators, and they should get their shot cleared in time for peak vaccination season. Kelly?

Wow. That's a big story. All right. Angelica, thank you very much for that. We appreciate it. We're going to get a look at bond yields coming up next. Power lunch is back in two. Welcome back.

Bond yields have been on the rebound today. Let's get over to Rick Santelli for more on this. Rick, is this what is hurting the broader markets? You know, today it was all about that 10 o'clock, excuse me, the 945 Eastern data. So we did see initial claims rather tame, even though 19 consecutive months above 1.8 million in continuing claims, which seem to have been overlooked.

But once the strong service sector PMIs hit the wires at 945, everything was a bit off to the races. Now, as we stand now, a two-year led both on the way down and it's leading on the way up. It's up eight basis points. But if you look at a two-day chart, what's interesting is, The left side and the right side are much more imbalance in the short maturities. All maturities right now have traded above yesterday's high yields.

But the longer the maturity, the further above yesterday's high yields. So you can see tens there, the distance is greater. Why is that important? Because it shows that momentum is now building long maturities have switched from kind of a stale trade to a more aggressive trade as some of these anecdotal pieces of stronger economic news seem to have a hold on the long end reversing some of that buying that pushed yields down well under that 385 mark. Now, if we look at tens minus boons, this trade has taken on some added significance in front

of the September Fed meeting. Tens minus boons is hovering at the narrowest spread in about a year, 160 basis points. But traders are really watching this, FX traders, because should we start to narrow that distance a bit, the next chart is what they're going to pay most attention to. This is a four-year chart of the dollar index. Yeah, I know we're not really that close to 100 yet. However, when you take a step back, you're closer from a technical perspective because that's the macro support level. Violation of that would be a big deal. And of course, us starting an easing cycle might narrow that spread, triggering many more FX traders to think a violation of $100 a

index is possible. So you want to keep a very close eye on our rates versus European rates and the interest rate differentials that affect our currency. Dom, back to you. All right, Rick Santelli, with the check on the fixed income markets on the bond report. Remember, you can always hear us on our podcast. Be sure to follow and listen to Power Lunch wherever you go. Power Lunch, podcast, audio format. We'll be right back. Welcome back. We're solving world peace in this G-block. We only have Actually, we might be explaining why Starbucks has so many problems. Let's start with a federal judge in Texas, though, who has thrown out the Biden administration's ban on non-competes that was set to take effect September 4th. They say the FTC does not have authority to ban practices.

It deems unfair methods of competition by adopting broad rules. Okay. That's a big deal. Now, all right. I want to take you to the other one, solving world problems here. Fall is upon us, at least according to Starbucks, the coffee giant launched its fan favorite, yes, pumpkin collection today, two days earlier than last year. So could this move be Starbucks's shot to get sales back on the upswing before Brian Nichols steps in formally to the role? You know that's why, first of all, but Dom doesn't like pumpkin, and it turns out none of the other guys around here do either.

Give me peppermint mocha. I will fast forward to there right away. Is this a girl only? I don't know what it is. They got to broaden it out and they'll do just fine. Thank you for watching Power Lunch. Closing bell starts right now.