Power Lunch - Countdown To The Fed, Hitting The Brakes 10/31/23

Episode Date: October 31, 2023

We’re just 24 hours away from the latest Fed decision on interest rates. Markets are expecting no change, but would that just be another pause? Or a sign the Fed is done? We’ll debate.Plus, signs of a slowdown are leading one auto analyst to ask if a global meltdown is coming for electric vehicles. We’ll ask him why. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Courtney Reagan. I'm Tyler Matheson coming up, 24 hours until the Fed decision on interest rates, markets expecting no change. But would that just be another pause or a sign that the Fed is maybe done for this rate hiking cycle? Plus, hitting the brakes on the demand for electric vehicles. Signs of a slowdown leading one analyst to ask whether a global EV meltdown is coming. We'll dig into that one, Cort. But first, let's get a quick check on the markets here with a couple hours left to go. in trade. The Dow would be higher, where it's not for Caterpillar, taking about 80 points off of the Dow. Results for the third quarter were better than expected, but concerns about the order backlog, that's what's weighing on the stock. Shares of Surrepta getting crushed after a setback for its Duchenne muscular dystrophy drug failed to meet the main goal of a phase three trial. Tyler. All right. We start with the Fed as we're less than 24 hours away from the big decision on interest rates. Wides widely expected, of course, that the Fed will keep rates unchanged as the economy

He's still under pressure, and there is turmoil, of course, overseas. Let's discuss the stew with Gus Foschet, chief economist at PNC. Gus, welcome, good to have you with us. You know, if we went back a year ago, many analysts, I don't know about you, we're saying, well, it's probably, we're not going to a recession now or soon, but maybe second half of 23, 23, 20. Now most people are saying 24 if we have a recession at all. Where are you on this recession, no recession in 24?

question? I think the most likely outcome is we do get a mild recession, starting around the middle of 2024. There's no question, but the labor market has been stronger than we were expecting, that household spending is held up better than we were expecting. But we do continue to feel the drag from higher interest rates. I think we'll feel more of that over the next six, nine months or so. And so given the inversion in the yield curve, given the fact that we have not felt the full impact yet of Fed tightening, I do think that we will see that mild recession. starting sometime around the middle of next year. So does that suggest to you, does the fact that you and many others see sort of the same thing

and that many people attribute the probability of a recession to what the Fed has done and as the higher rates ripple through the economy, does that suggest to you that maybe the Fed is done? It certainly does suggest that the Fed is done. I would not be surprised at all if we do not see the Fed tighten again. between the meeting that we get tomorrow and then the next one in mid-December, we'll have two more jobs reports. We'll give an indication of how the labor market is. We'll get a sense of how consumer spending is doing in the fourth quarter. And I think all of that together will

suggest that inflation is slowing towards 2%, that the economy is softening and that that means that the Fed does not need to raise rates again. Gus, that's sort of what I was wondering was inflation, as you bring that up, obviously. We're still well higher than the intended target. Do we need a rate? recession to get inflation closer to 2%? If the Fed is done, if they don't do anything else, how's it going to get lower? You know, just a softer labor market than on an outright contraction. I think there's still about a 40% probability that we get a soft landing where economic growth slows substantially, but we don't get an outright contraction in the economy. That would still mean

a higher unemployment rate getting up to around 4% or so. And that could cool off inflationary pressures enough to bring inflation down to 2% without a recession. That being said, I think the more likely outcome is, given all of the tightening that we've experienced, does lead to that mild recession sometime next year. Since the last meeting, of course, the war between Israel and Hamas has occurred. Does that add to the likelihood that the Fed stays put and pauses or maybe is done? In the near term, yes. I think that obviously there. There's more uncertainty out there and that that is a reason for the Fed to pause. However, if we do see a wider conflict in the Middle East, if energy prices move higher,

and in particular, if we start to see energy inflation bleed into core inflation, that is inflation excluding food and energy, then I think the Fed may need to raise rates again in response to that. So the key question is what happens to energy prices because of the Middle East? What happens to core inflation because of the Middle East? And if we do start to see additional inflationary pressures, then the Fed may need to raise rates again. And that just increases the likelihood that we get a recession. All right. Interesting forecast. Gus Foshae of PNC, we thank you very much.

Have a good day. Thank you. Well, turning back to the markets, which are now higher after some early losses, the Dow and S&P, both trying for a second straight day of gains. So how should investors position ahead of tomorrow's Fed decision that we were just talking about? Nimerick Kang is chief investment officer and senior portfolio manager at Northstar asset management. She's also a new face to CNBC. Welcome, Nimrod. It's great to have you here. So you just heard our discussion with Gus. I guess I'll have you sort of pick up on what you think the Fed will do and then how you would be positioning investors from there. Yeah. Thanks for having me, Kelly. No. So we are with the market that Fed is in wait and see place here, having put through 500 basis points of interest increases over the last 18, 19 months or so. In terms of how we're positioned, you know, the only thing we feel very confident about is that we expect higher degree of uncertainty and volatility in the market.

So with that, we're very focused on risk. And in that framework, if you think about it, you know, we're looking at bonds that we can get at 5 to 6 percent yield secured by contractual obligations by the U.S. government. That sounds pretty good to us right here, Kelly. So we are where it makes sense, where our clients are underway their fixed income, we are building out fixed income ladders for them and getting them that 5 to 6% income while maintaining flexibility for them as well. It is really interesting, obviously, with what's going on right now because we haven't seen interest rates this high in many, many years, more than 15 years or so, I believe. And so now you are looking to fix income products, particularly for a subset of investors perhaps that are more cautious or less or less risk. risk averse when you're looking at equities versus bonds. I mean, I find it very interesting here

when you're talking about the wealth transfer. Why is that something important to consider when you're looking at bond investing versus equity investing in this environment that we haven't seen in quite some time? Yeah, no, absolutely. One of the key things we see here with the interest rates going up to the 5% range and this new monetary cycle that we are in, you know, for years, retirees and other savers have not been able to get any interest on their securities. All of a sudden, there's interest coming. You know, I just recently read the U.S. government is paying somewhere close to $600 billion in interest.

That's going to go all the way up to $1 trillion. That's going to someone, and that's going to the savers. And when we think about the demographics for our country with the number of retirees coming on board, you know, one in six Americans is over the age of 65. this cohort is going to grow by 35% by 2030. Those people do need that income. So from that perspective, we think it is actually a very good tailwind. The other thing I would say, Kelly, we still believe, very much believe that sticking to long-term

strategic asset allocation is the way to go. Again, it depends on the time horizon for various investors. But time and time again, what we have learned from the market is staying invested is the best way to have those long-term returns. But when we think about staying invested in the market, we want to own those high-quality stocks for companies with balance sheets that are strong, that have good cash flows, that are not dependent on the financial markets for their financing needs. So within that, we see plenty of ideas as well. So as Courtney's been pointing out, you know, the idea here is that we haven't seen this kind of interest rate environment in 15 years

or so. And over the past couple of years, you have been benefited by staying very short in your maturities, if you were buying treasuries, for example. You still are. But are we getting close to that point where maybe you want to lock in

some longer term duration as well on the theory that maybe the Fed is getting close to being done? Right. Tyler, when we take that viewpoint, we don't know what the future holds. But what we do know, right, we are getting higher yield now than we were before. What we want to do is diversify our duration as well, duration exposure as well.

Longer term, I mean, you know this, you have speakers here all the time that talk about the deficits, all kinds of uncertainty that we're dealing with, increased social political polarization. The pressure we think is still upwards on the interest rates. So we just want to diversify across the duration curve there. Let's talk about a couple of the stocks that you like. I'm going to say I'm the target of one of them, Striker, which is a replacement knees and hips and other things. I'm right in that demographic. And you also say Home Depot is kind of a demographic play for the baby boomers who are going to stay put and remodel rather than move.

Yeah. Absolutely. So, you know, when we, I just talked about the aging demographics, you know, people might be getting older, but they still want to live very active lifestyles. We do. Yes. Yes. Dagonet, you're right. Yes. So with that, we like companies like Stryker, Leader in Knee and Hip Replacements. You know, we continue to see very favorable long-term demand transfer companies like that. We like Danaher, for example. It's a leader, you know, again, a company that provides tools and diagnostics for drug development and discovery.

And yes, there's been short-term overhang related to the COVID-19 pandemic inventory overhang. But longer term, if you're willing to take that five to 10-year viewpoint, we do think there's going to be increased investment in drug discovery and development. And finally, you're right, Home Depot. As you know, seniors might be aging, but they want to stay in their homes and they want their homes to be comfortable for them. So more demand for retrofitting those homes. Not to mention that majority of Home Depot's business is repair. and remodeling and retrofitting. So think of like leaky faucets.

Yeah, absolutely. They do talk about renovation and the age of homes, really, that drives it more so than other things in the housing market. Numerit, I guess I am curious, you're talking about these ideas for long-term or patient investors

that have a little bit more risk appetite, five to 10 years. If your horizon is less than five to 10 years, are you saying no to equities altogether? No, we don't want to say no to equities. you know, I again, one of the big things is we don't know. The future is uncertain and it's interesting. You know, one of the reasons the study after study shows it's best to stick with your strategic asset allocation and stay invested because the worst days in the market are followed by the best. And we don't want to miss out on those best days because that's where the return comes from.

But I think it's getting to that right asset allocation that's really important and understanding what your short-term liquidity needs are and then positioning with respect to that. And then I guess just if we can wrap it up, you know, today is a better day, as was yesterday, certainly if you're bullish on the markets, but it's come off a relatively rough month. It seems as if a lot of sentiment is negative or at the very least concerned. I'm hearing that from you and from Gus, who was the guest that joined us right before. Do you agree with that sentiment? Are you just cautious or negative, uncertain about what's to come? Yeah.

It's more related to high degree of uncertainty, right? high degree of uncertainty, more volatility. Coming into this year, most investors were cautious, the market went up and then has given up a lot of those gains as we're heading here into the final close of the year. So it's difficult to kind of know on the short-term basis. Yes, there's plenty of things to be worried about. I think offsetting that is a lot of that sentiment is baked into the equity prices. And that's where we think that you can actually pick up these great opportunities that have come up, that valuations have derated quite a bit and position for long-term returns quite well.

All right. Yeah, Home Depot is down 10% year-to-date. Dana Her down 18% year-to-date. But Stryker, one of your other picks is up 10% year-to-date. But obviously, you think it has room to run over the next five to 10 years. Nimert Kang, it's great to have you on CNBC. Thank you for joining us today. Thank you.

Well, let's get the traders take on what to expect from the Fed tomorrow and how the markets may react. Rick Santelli, joining us live from The CBOE. Yes, Courtney, indeed. As you look at a chart that started a week ago Monday, that was a key day. First of all, we could debate as to intraday violations of 5%. But there's been no close above 5%.

That 23rd was an outside day. And since then, we've had a contained range. If you look at tens and 30s, yes, we are hovering very close to the highest levels since 2007, 16 years. The high close is 499 and 10s, 511 for 30s, not far from where there. they're trading now. Maybe one of the bigger stories is the Bank of Japan really didn't do as much as many thought they would. They basically tweaked on the reference with regard to a 1% tenure. But look at this chart. The dollar is at the strongest, yet at the weakest, in 33 years going back to 1990. But tomorrow's the big day. The Fed probably doesn't do anything, but there's a lot

to talk about. Dave Miso. How you doing? Hey, what's that, Rick? All right. Quickly, in front of tomorrow's Fed decision, first of all, do you think they're going to do anything with rates. No, they're going to keep rates. They're going to keep them where they are. Okay. Now, you saw what GDP was last week, right? Yeah.

Almost 5%. Yeah. Okay, do you think we're in a 5% economy looking at through the wind shield versus the rearview mirror? My pocketbook surely doesn't say we are. We're much higher than that. Do you think if the Fed truly believed we had that kind of horse power, wouldn't they be doing something tomorrow?

Yeah, you'd think so, right? You'd think so. But they're always behind the curve. So we'll see what ends up happening. Now, when you think about the dynamics of interest rates and 5%, we haven't closed above it, but there's been significant talk that there's a lot of movement out of equities into fixed income, the opposite of there is no alternative, Tina, your thoughts? Well, that's what they kind of tell you.

They go with that as a convenient excuse. I don't necessarily know if I buy it, though. And why wouldn't you buy it? You think rates can go higher? I do. I absolutely think rates can go higher. I think they can go much higher. I mean, just because they might come down a little bit in the short term in the longevity,

I think we're in a bull market. And the market somewhat agrees with you. Since we had that violation of 5% on the 23rd, the range has been basically 479 to 499. We're in a very tight range. All right, real quickly, my last question, a lot of debate going on. Gruncle Miller's going to be on Squawk Box tomorrow. There's a plug. Talking about the Janet Yellen and Treasury, miss a great opportunity to do more long term.

Your thought. Yeah, well, everybody and their mother refinanced rates when they were at 3% mortgages. They all got their, everybody, whatever, except the Fed. Except the Fed. They didn't do anything. Now, the argument is the primary dealers were nervous about liquidity and long maturities. I can understand that. But that's a question of my opinion of price.

You give a concession, they'll show up. Your final thoughts. If they buy the offer or above the offer, they're going to get filled. Do you remember in August when tenure hit their all-time low, half a percent? 50 basis points closed. Mortgage rates were still hovering at 2%. They could have issued a 2% tenure well above it. And they would look back and think what today?

Exactly. Oh, they'd look like heroes. But again, they're always behind the curve. Well, thank you very much. Dave. Happy Halloween. And Tyler and Courtney, back to you. Let me ask you a question, Rick.

Three years ago, should the Treasury have issued a 50 or 100-year bond at interest rates that would today look incredibly low? You know what? As much as I would like to say yes to that, I would say no to that because 50 and 100 year didn't have any deep liquidity pool. So liquidity would have been an issue. But making liquidity an issue for doing more tens and thirties doesn't make sense to me. As Winston Churchill used to say, what we're really arguing about is price.

They could have made a price concession and done longer maturities. But 50s and hundreds just might have been a bridge too far. Rick Santelli, good answer. Thank you, sir. We'll have special coverage of the Fed decision live from Washington tomorrow, starting on 1 p.m., hitting the decision at 2 p.m. And we'll go right through Fed Chair Powell's press conference. That starts promptly at 2.30.

A lot to talk about, a lot happening tomorrow. Very busy week. But first, the strikes are in the rearview mirror out in autoland, but there are still roadblocks ahead for the automakers. Coming up, we will hear from an analyst who's examining the possibility of a global EV meltdown, not just a slowdown, a meltdown. Stay with us. Welcome back, everybody. The major automakers weathered the UAW strike,

but our next guest says there's more to fear. He warns of a potential global EV meltdown as manufacturers increasingly report slowing electric car demand. Joining us now is Emmanuel Rosner, Deutsche Bank, Auto Analyst. A meltdown, not just a slowdown here, Emmanuel. Why? And why are you so down on these EVs? Yeah, thanks for having me. I think the slowdown is in the EV adoption. So essentially, people adopting EVs slower than expected. The meltdown is in corporates, companies, and investor expectations. Essentially, companies have planned massive investment on the premise of much faster adoption of EVs. This is not playing out. And now we're hearing from corporates

that they're pulling back or canceling altogether these investments just last week. Ford basically said they're not going to spend $12 billion out of the $50 billion they were going to spend in EVs. GM has pushed out a second EV factory by about a year. They're pushing out some new models and they're going to be launched later on. So it is essentially a real meltdown of expectations which has resulted in a meltdown of stock prices. What could change that picture? I would think way higher gas prices might change that picture for one thing. More affordable EVs might change that picture for number two. Am I on the right track there? You're definitely on the right track. Affordability, I think, is the name of the game. And this is what's crucially

lacking from EVs right now. EVs are more expensive than their counterpart on the combustion engine side. And the early adopters basically didn't care and bought them. But now the average buyer is essentially saying, why would I pay 10, 15, 20, 25% more for the privilege of driving an EV. And so there's a lack of affordable model of affordable EVs. And that's something that unfortunately we feel will take some time to be corrected. The very reason why GM is saying, hey, we're going to take a pause, slow things down, and then maybe issue these new models later on is so that they can essentially try to work on lowering this cost and then come out with some cheaper, more affordable model. But that will take some time, probably another couple of years.

even Tesla, frankly, and you know we're long-term bullish on Tesla, but even Tesla is essentially struggling with affordability. They're lowering prices consistently, and they're really not going to have a more affordable model for another couple of years, probably at the earliest in 2025. They've really lowered the price on that. They've really lowered the price on the Model X, which was a high-price model. They've taken that way down. Court? Yeah, I mean, I guess I'm just wondering, you're talking about price, and certainly that is a factor it makes a lot of sense. But what about the infrastructure? I mean, I I am a non-EV owner, and I have to admit, it makes me nervous to have a car that I know that I need to

find a place to charge, which might be harder to find than a traditional gas station. Is that still a worry or am I in minority? No, absolutely. It's still a real concern. I think that a big piece of driving EV adoption is going to be able to essentially address some of these concerns. Tesla has done a really good job at it. Obviously, the network of Tesla charger is very, very dense, and so you don't have to worry about it as much. It's even integrated as part of your, you know, your drive and in your GPS, where you should stop and recharge. But for just about every other EV, the network hasn't in its dance, and range remains a real, real concern. In the end, what he bows down to, though, is will people sort of like take that step, make that bet when it also costs more money?

And so all of it needs to be addressed. I think affordability is probably going to be the biggest lever. If I am interested in investing in the automobile sector broadly defined. Am I wiser investing in a company that is sort of power train agnostic, in other words, that makes the seats, the side panels, the, oh, I don't know, the gear shift knob, than the OEMs, the manufacturers? Absolutely. And that really is, you know, our thesis here. It is incredibly difficult to make a bet now on the power train mix because it's really heading in the wrong direction and it could be extremely costly. If you can identify some names that are power train agnostic, but I have good secular growth from an adoption curve for their technology, then you can really have some incredibly strong revenue and earnings growth almost regardless of the power trade mix. One of the names we often speak about is mobilized.

Mobilize essentially a play, a pure play on autonomous driving. They don't really care whether that technology goes into an EV, whether it goes on a combustion engine. It's all about will cars become more autonomous. This is a good example of what could work almost regardless of power train. Emmanuel Rosner, Deutsche Bank. Thank you very much for joining us. Thank you. Well, coming up, Return of the Mac, Apple unveiling a host of new products at its, quote,

scary fast event will bring the highlights for you and the key announcements to come. Plus, hitting turbulence. JetBlue shares fall into a 12-year-old. low after forecasting a wider than expected loss for the current quarter. We'll trade it in three-star lunch. That's ahead in the show. Power Lunch is back into. Welcome back to Power Lunch. As we get ready for tomorrow's Fed meeting, let's turn our attention to one of the most rate-sensitive areas of the economy. Housing, of course, for the latest impact on rising rates and home sales. Let's bring in Diana Oleg. Hi, Diana. Hey, Courtney. Now, the housing market has certainly cooled

dramatically this fall. Some say it's frozen before winter, but one part of it is still hot, and that is home prices. Take a look. Prices in August nationally were 2.6% higher than August of last year. That's according to the S&P K Schiller Index. That's up from the 1% increase in July. It's also about 6% higher than when prices bottomed at the start of this year. Interesting, though, the cities seeing the biggest gains are not the pandemic hotspots. Quite the opposite, Chicago, New York, and Detroit led the pack. Meanwhile, formerly strong markets like Las Vegas, Phoenix and San Francisco are all in the negative year over year. The regional differences are now much bigger than they have been, and that has to do with what we've seen in the markets historically

more affordable. Now, granted, this report is from August, and it's a three-month running average, so it really goes back to June. Take a look at where mortgage rates have gone in that time. I don't know if we have that chart, I guess not. But we started June at 6.85 percent and then climb pretty steadily, now hovering just below 8%. That's a pretty big difference, obviously, on a monthly payment. The reason prices have held is because supply is so low and there's still demand out there. The slowdown in sales, though, is causing a slight uptick in supply, still nowhere near normal levels, Courtney. You know, Diana, we also have this lawsuit involving, what is it, the housing authority? Can you tell us about what you know about this? Yeah, actually, it's just

broken recently, and that's why we're seeing some of the stocks, especially Zillow taking a big hit on this. A Kansas City jury found the National Association of Realtors. as well as two brokerages, Keller Williams and Home Services of America, a Berkshire Hathaway company, found them guilty of to colluding to inflate or maintain high commissions through their clear cooperation rule. Now, we've gotten a comment on this from the NAR, which says NAR rules prioritize consumers, support market-driven pricing, and promote business compensation. They say this matter is not close to being final, as we will appeal the jury's verdict.

Now, this is all about whether or not consumers are getting a fair deal when you have real estate agents, brokerages, all working together. The lawsuits did claim that the NAR rules violated antitrust laws and inflated fees paid to buyers' agents by requiring a listing agent to compensate a buyer's agent for listing a property on the MLS. Anybody who's been out there trying to buy or sell a home knows that these fees are very confusing. And we never know from brokerage to brokerage what the fees are going to be between the buyer's agent, the seller's agent, the seller's agent. And so this is a lawsuit that did obviously go against the realtors, but they said they will appeal it as have the other parties in the matter. But again, it's tanking the stocks. Very interesting. Diane Oleg, thank you very much for that report. And then the color there on that lawsuit that makes some sense for what's going on to housing market right now or the stocks at least.

Well, let's continue our conversation about housing. Our next guest says while home prices have remained stable and in some areas, as Diana reported, risen. Market challenges continue, as Diana also reported. Let's bring in Daniel Hale, chief economist at realtor.com. Daniel, why don't I start by getting your reaction to that lawsuit that Diana was just reporting on? Do you have any thoughts there? You know, I think there are a lot of legal issues at stake. As an economist, I can say that we know that affordability challenges are important for consumers right now.

So I think making sure that consumers are informed and in the market with good representation, I think, is really important to making what is for many. the biggest decision of their lives, the biggest financial decision of their lives. So I think it's important that consumers are informed and work with professionals. Now, as far as the pricing and the legal implications of that pricing, I'm going to leave that to the lawyers to talk about. Well, the transparency, it seems to me, has, it's been an opaque process of who pays whom, who's really paying for it. I don't mean to get into this deeply because I'm not really skilled enough to talk it through. But there is a lot of opacity, shall I say, to use a SAT word in that thing. But let's talk about the market dynamics a little bit more. It would seem

what Diana said would be true, that in the existing home market, prices have remained relatively stable despite rising interest rates. And the reason is because supply is so low. And so that means you would have low supply and demand, which is stable or rising. So that means people are willing to pay more for those low supply homes, right? Yeah. So that's consistent with our data. We do see that the number of homes on the market has declined the third month of decrease in our September data. And if you look at where we are compared to four years ago before the pandemic, there are more than 40 percent fewer homes on the market today. So put another way for every, five homes that would have been on the market four years ago, today's buyers are seeing just

three. And so even if there aren't as many buyers as I were in that pre-pandemic period, and we know that they're likely are not given what's happening with home sales and at long-term lows, we can see that the market is relatively competitive and pricing really hasn't budged a ton. Those caseholder numbers that Diana reported on, as she mentioned, are three-month averages with the most recent data coming into August. Pricing has saw. a bit, according to our numbers. The median listing price was up just 0.4% in September. So a little bit more softening, but a surprising amount of resilience given how much costs have gone up and how challenging it is for buyers in this market today. I was just going to say that, Danielle. There were some stats that were sent out here by our data team. The 30-year fixed rate mortgage as of March 11th, 2022 is 4.29%. And as of this week, it's 7.88%. But the prices of homes are not coming down to equalize for that. I mean, Why is that? Is that simply because the inventory is so tight and that's making the price so resilient? Yeah, right now, limited inventory is one of the biggest drivers. I think, you know, when mortgage rates first started going up, you also had home prices that were already high.

And so you had a lot of existing homeowners that could sell and maybe make a move using a lot of the equity that they had built up in their home. So that was an early driver as rates started to rise. But now we know that a lot of existing homeowners are choosing. instead to stay put. They are not putting their homes on the market. We continue to see the number of new listings on the market come down from a year ago. And this is on top of low levels that we've seen, the lowest levels that we've seen essentially ever in our data. So existing homeowners are choosing not to list their homes for sale. That's driving the number of homes on the market down low. And it's raising the importance of new construction and newly built homes in the market. Our analysis at Realtrow.com shows that the number of new homes on the market is roughly about

30% of the market compared to about 15% historically. So when people are out there shopping, they have a lot more new options to choose from than they have historically. And at the same time, builders are willing to buy down mortgage rates to help homebuyers, you know, find homes that meet their budget. So that can be a really good option for home shoppers who are out there right now. If they're in an area where new construction exists, builders have been a little bit more flexible. And we see that reflected in the sales data as existing home sales have to declined, new home sales have actually fared somewhat better. And that was an interesting point.

I was going to ask you about with the builders actually sort of offering some relief to some of the homeowners making new homesales or new homes, I guess, a little more attractive than existing. I guess beyond that, I mean, have we seen continued migration to lower cost areas of the country as we remain sort of a hybrid, remote work dynamic in a lot of environments? I mean, are people just saying it is just too expensive to do this? one way to lower the cost, let's move entirely to another lower cost area of the country. Yeah, the data suggests that some home shoppers and even renters have that option and are

able to pursue affordability by relocating. Realtor.com does a study called our cross-market demand report, and it shows that we still have an outside share of home shoppers that are looking for homes somewhere other than where they live, and they are predominantly looking for warmer weather and affordability. So no surprise that the South is doing well. we also see a lot of interest in the Midwest and pricing trends kind of conform to that. We know that the biggest price runups in recent months have been in Midwestern markets where there's a lot of affordability. We see similar trends in the rental market. So overall,

nationwide rents have slowed in parts of the Midwest and more affordable parts in the Northeast. We continue to see rents go up. So buyers and renters alike are looking for affordability and trying to move if they can to find it. Interesting stuff. Daniel Hill, Well, thank you very much. I'm from the Midwest. Midwest is best. Just saying, Tyler. It's nice there. The living is good. All right, let's get over to Christina Partinevulus for a CNBC News update. Christina. Thank you, Tyler. Israeli military officials claim the strike on a refugee camp in Gaza was targeting a senior Hamas commander. An army spokesperson told CNN in an interview that Israel was behind the attack on the Jabaliyah refugee camp today.

A local hospital claimed dozens were killed in the blast, but NBC News still has not independently confirmed those numbers just yet. The Jabaliyah refugee camp is the largest of Gaza's eight refugee camps. White House officials say Americans trapped inside of Gaza still have not been able to get out. But more than 60 trucks carrying aid were allowed through Egypt's border crossing today. The White House says those trucks contain water and food, but still no fuel. As Israel warns, Hamas could take it for military use. A federal judge dismissed Brett Farb's defamation lawsuit against a fellow retired NFL player today. The judge ruled Shannon Sharp used.

unconstitutional protected speech when he criticized Farb's connection to a welfare misspend case in Mississippi during a sports broadcast. Farb sued sharp in February and called his statements about the controversial, uh, conch controversially false. Tyler, back over to you. Right. Christina, thanks very much. Christina parts of nevelas. Ahead on power lunch, shares of caterpillar sinking on weaker than expected sales outlook. We will trade it in three stock lunch. Power lunch will be right back. Power lunch. We're joined now by Pippa Stevens, who claims Everything is a commodity story. Okay, Pippa, what do you have for Halloween then?

Well, truer words were never spoken. But if you bought candy this year, you probably noticed it's a little bit more expensive than last year. It was pretty expensive, actually. Yeah, and that's because sugar prices are hovering around a 12-year high, while cocoa is at an all-time high. This is thanks to erratic weather conditions exacerbated by El Nino that are hitting crops. India, which is the world's largest sugar producer, hasn't gotten enough rain in the regions where it's grown. That led the country to ban exports for the first time in seven years in an effort to contain domestic prices. Given India as a key trader, the move is pushing up global prices.

For Coco, the market is heavily concentrated with West Africa, producing about 75% of global supply. Last year, there was too much rain, and now El Nino means it might be too dry. David Branch from Wells Fargo's Agri Food Institute noted that cacao trees require specific weather conditions with not a lot of room for error, making them especially vulnerable to climate change. Now, one more commodity to point out, which is uranium, rising 50% this year, according to UxC, amid renewed interest in nuclear power. Spot prices just hit $73, which is notable because the last time it was that high was February 2011 just before the Fukushima accident.

The URA and URNM both jumping today, thanks in part to Minor Kamiko, which reported this morning, saying, quote, we are experiencing the industry's best ever market fundamentals. So three under the radar commodities that are outperforming. Very interesting stuff. Yeah. Candy was expensive this year, actually. Thank you, Pippa. Well, Apple's product event may be finished, but the street is still eagerly awaiting its latest earnings on Thursday. We'll get you ready for that when Power Lunch returns.

A big week for Apple with earnings expected on Thursday, but last night, the company holding a big event focused on its max. Steve Kovac joins us now from San Francisco with more. So was this super scary fast event, Steve? Oh, yeah, it was very spooky, Courtney. Look, Apple was revealing its newest chip from Max last night. They're calling it the M3 because it's a third generation. That's going into the MacBook Pro and IMac desktop starting next week. Now, there are three versions announced yesterday of the M3 trip.

There's the base version, the M3, then the M3 Pro and M3 Max, each with more performance than the last. Other than that, these are the same computers that Apple's been selling for last. couple years, except now that MacBook Pro, it comes in black. We're not expecting this announcement, though, to revive the Mac business, which has been slumping all year. For example, sales were down 7% in the June quarter, and we'll find out last quarter's results, like you said, on Thursday. But more interesting than the computers and those chips themselves, we're setting up a new PC fight with computer chips based on these armed designs. Qualcomm last week revealed its first PC

chip that'll start shipping next year. By the way, Qualcomm company best known for making smartphone chips, and Nvidia, the AI chip darling and AMD reportedly doing the same. Now, this is all bad news for Intel. Its chips aren't as powerful or as efficient as the arm-based chips. You can get a lot more battery life and performance when you put those in laptops. But Intel CEO, Pat Gelsinger, brushed off those concerns last week, saying he doesn't think the competition will be significant court. Huh. Interesting stuff. I want to go back, though, to the buzz ahead of Apple's results. Always a really important one. The shares have really underperformed. What are you expecting? Yeah, and interesting enough, it's really unperformed in this run-up between, you know,

what we saw in the summer. Usually the summer is a good run-up, but it's actually been the opposite. But look, the big question going into earnings is what is the guidance for this holiday quarter? Can Apple return to growth? Apple has already said they're expecting it's going to be fourth quarter in a row, a full fiscal year of declining sales. Though this coming holiday quarter, comps are going to be a lot easier, Courtney, because of the COVID shutdowns that impacted production last year. And there was an extra week last year. So it's going to be a little bit easier for Apple to show its return to growth.

But even today, just as recently as this morning court, some analysts trimming estimates for the holiday quarter. Interesting. Always a big one to watch. Steve. I know you're going to follow up closely for us. Thanks very much. I'll be there.

Thanks. price of gold hovering near $2,000 an ounce, with some experts calling it a better investment than stocks of bonds right now. So how does our trader feel about it? We'll ask them in a fresh three-stock lunch after this quick break. Time for today's three-stock lunch. Today, we are taking a look at three big movers. First up, Caterpillar. The company beat analyst estimates, reporting a double-digit rise in profit, but the stock is down about 6% on a weak outlook with signs of slowing machinery demand. So here with our trades is Borish Slashberg of BK Asset Management. He's also a CNBC contributor. Boris, what's your trade on Caterpillar?

So Caterpillar, I think long-term is definitely a buy because infrastructure is a woefully ignored piece of our industry. And we've ignored for decades, and we're going to have to spend decades actually doing infrastructure back. So to me, Caterpillar is a long-term buy. It's a question whether tactically it's a buy right now. And I think probably a more intelligent trade right now is to simply sell 200 puts three months out. You're going to get about a 10% yield on an investment while you're waiting. If the stock comes in, you buy a 10% cheaper. It is going to run into a little bit of turbulence now because of geopolitical concerns, because of rates. But overall, I definitely think it's a long-term buy. All right. Let's talk about JetBlue

shares now, 12-year low. Airline forecast more losses for the fourth quarter and gets ready to head to court for the spirit anti-trust trial trying to buy spirit. Boris, what's your trade on JetBlue at $3.71? It's literally a punt at this point. I mean, you know, JetBlue has. has problems from every angle. The big problem, of course, is the merger with Spirit if the Department of Justice does not let that go through. It's going to be a big problem for them, not only because they have to break up the merger, but because the spirit itself will become a very, very formidable competitor to JetBlue. Secondly, the macro environment is starting to get a little bit more difficult for them. So they have to, you know, I think lower pricing. So from every angle,

I think it's a very tough trade unless they get some kind of DOJ clearance. And then you might be able to get a stock that's two times from this level. So you have to expect the fact that are either going to lose your money or double it at this point. That's the punt in jet blue. And finally, gold, the commodity testing, the key $2,000 level for the first time since May. So Boris, what's your trade on gold? So, you know, I think it's really interesting. If 220s are the return of the 1970s, all we need is bell bottom jeans and the rallying gold, right? I think gold is very interesting. It could be the serve the hidden trade of 2024, especially if geopolitical tensions rise up, and if sovereign debt issues become a really, really big concern. We're watching this 2000 level very, very carefully.

If it holds around these levels, it could be very much a trade all the way to the upside. There are three things that need to see gold to go up. One, it obviously holds 2000, ideally goes all the way to all-time highest 2100. Two, you see volume at around quarter of a million contracts on the CME. And three, it makes the cover of barrens. That's going to, I think, create a lot of retail interest. So to me, gold is definitely a very, very interesting trade at this point. It could be a trade of 2024 if things get worse. All right, got it. Thank you very much for picking our three stocks for three stock lunch for Slossburg. And we will be right back with a couple more stories you need to know about. We've only got a couple of minutes left in the show,

and we've got a bunch more stories we want to tell you about, so we'll get right to it. We were talking about this a little bit earlier, but new data now confirmed that the price of Halloween candy is growing at a frightful pace, according to Data Semby. They're now up those candies. 13% from last October, more than double the 6% increase for groceries over on, as Pippa said. It's sugar, which comes from India.

Climate issues there, and the same affecting cocoa prices in Africa. I noticed it too. When I was looking at those bags, we buy bags to give out, and we give bags to our doorman to give out. I thought, oh my gosh. Why are they so expensive? But now I know. Well, Gen Z and millennials are increasingly treating themselves

to the latest shopping trick, Dupes, which short for duplicate. They're buying versions of luxury items to get the experience without the hefty price tag. It's not even luxury items. You see a lot of Lulu Lemon doaps or anthropology doaps online, free people dopes. And I think this is just a smart way to shop being from the Midwest. We used to always brag about it. Like, oh, look at this. These are knockoffs, basically, right? Yeah, but that's been happening in fashion for many, many, many years. Yes, it's the expensive version, and then someone else makes a little less expensive version. And it used to be something you didn't want to talk about. But now people

are proud of it. But it's a way we've always been in the Midwest. Anyway, Americans are increasingly getting paid for not doing work. Growth and paid time off is widening the gap between the number of hours for which workers get paid and the number of hours for which they are actually on the job. Employers have expanded paid benefits to retain

and attract workers in this hot labor market. But hey, if you're more productive at lower time and you're happier as a worker, because you're more time off. It's also the kind of benefit that I always said, it doesn't cost you anything. Exactly. You know, it costs you the worker who's not going to be there that day, but it's not like a wage increase. All right, be sure to tune in for

our Fed decision tomorrow live from Washington. Thanks for watching, Power Lunch. And closing bell starts right now.