Power Lunch - Dollar's Impact on the Markets, Upbeat Holiday Sales Data 12/26/24

Episode Date: December 26, 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.

Welcome to Power Lunch. I'm Kelly Evans joining me at the desk just off the phone, actually. It's Steve Leasman. It's great to have you here. Seriously. Thank you. Appreciate you coming in for this. Stocks are flat with two hours left in the trading day, but we're trying to get back into Santa Claus rally mode. The major averages have winning streaks on the line. It's been four days for the Dow, three for the S&P and the NASDAQ. And we are in the second day of the training day of the period, which we historically call the Santa Claus rally. We've got to get extended into the New Year, Steve. We had a tough run into it, though, right? We kind of gave a few things up.

We had the Fed gave us a little coal in the stockings, and then we had a couple Fed speakers put maybe something other than coal back in there. We can think then we should call them Santa this year. Austin and John Williams both together. And now I think the market's trading on its own. Yes, it is. There's maybe a way to put it. Also watching today, those retail stocks, mostly higher today.

We got data from MasterCard spending, polls showing an increase of 3.8% over last year. That's not too shabby. And that's for November 1st through the Christmas Eve. Funny calendar this year. I don't think is that good. Why not? Isn't it nominal? It's not real. It is nominal. But I have an answer for you. Okay. Because I've been thinking about this. Tell me it's not deep. Is it disinflation? No. Goods inflation has been negative. So to the extent that that is, well, it's an okay number. It's not a great number. It's a pretty good number. To the extent that inflation for goods. Yep.

And to the extent that most of this represents goods, the nominal number should be very close to the inflation. So if it's minus one for the deflation, then maybe it was more like a 5%. It's only 0.1 of goods. Come on. Then that only adds a 0.1 to the headline? It would take it away.

But you know what I'm saying? So we'll get into this later. Okay. Am I supposed to read some more? No, we're watching Apple also. Another record high today in the market cap creeping closer to $4 trillion. I mean, we're talking really close right now. We're at 3.9.

We have to get above 264 a share, and we are at 258 right now. $4 trillion, right? Yeah, to get to $4. So you need $6? Yes, you do. Or a little bit less than $6. For the cool extra $100 billion. Is it the psychologically insignificant $4 trillion number?

Does it matter? Do you not think it matters to have a $4 trillion company? I literally never thought we'd get over a trillion. And now it's just a trillion-dollar company. Now Broadcom's a trillion-dollar company. But what is that telling you? I guess that the economy can support companies at this scale that we've, previously thought would never happen. You'd think they get to a certain size and they max out

competitively and so on and so forth. And now, no, I guess because of the scaling of tech and AI and all of these things, they can now deliver and bolster those values. And by the way, no one else in the world is delivering this. Maybe China has a couple of them, but we are ahead of the pack. Can I tell you what it tells me? Yeah. I look at something like Apple, a company that has very few employees. And think about the revenue or market cap per employee. I think they have a lot of employees. They don't have a whole lot relative to say GM. We need chat GPT to be the third person on the show. Actually look this up, but I can't get on my computer not because I'm having a computer problem. But in any event, I think about the idea we're talking about this tariff stuff in

manufacturing. All of the money is being made by companies that have relatively few employees and generate all kinds of income and market cap without employees. They have 164,000. Which is not much. You're right. Okay. I would have thought with the stores and everything, it would be a lot more. Now, remember, they have a whole bunch of people working for them in China.

That necessarily on their payroll, like at Foxconn, those kind of places. But in any event, they generate, are we going to have Steve on later? Who? Steve Kovac? Oh, yes. I think he's not, we'll talk to him about this. But the thing is this, we keep focusing on these manufacturing jobs, all of the money, all of the market cap, all of the capital is going into these companies with very few employees.

It strikes me that it points to... You don't know why? Why? Because the dollar is too strong. And the dollar has been too strong because China and other countries make their currencies weak, and they erode our manufacturing base. And so our only option left is to have the tech giants do what they're doing. So you think it's all the currency? I do.

What has happened relative to when these tariffs have been threatened? Well, you mean the fact we're at a 108 on the dollar now? Right. Right. That's not good. So much of that strength is post-tariff. What is that doing? That is foreign currencies adjusting for the potential for tariffs. And what's happening is offsetting it.

It's bad for us. Our dollar is way, way, way too strong. And some of it is set, and some of it is the market telling you what it is. Which is fine. The Europeans are not necessarily setting their currency. The Chinese are. They're letting it drift down. And what that's doing is going to offset some of the impact of tariffs.

Cheap dollar would go a long way to fix some of these issues. Let's dive more into markets in the economy. It's been a strong year for stocks. There are plenty of wild cards for next year, though, as the president-elect takes over for a second term. One example of uncertainty in our CNBC delivering alpha stock survey, we asked if Trump's proposed tariffs would help or hurt the economy, workers, and consumers, and the results were exactly split 50-50. On his broader policies, more than two-thirds of respondents think he'll be good for the economy and the markets, 71% in fact, think so. Let's bring in Brian Jacobson, the chief economist at Annex Wealth Management to discuss, Brian, do you think the dollar's too strong? Welcome.

Hi, thanks for having me. Yeah, I really enjoyed that dialogue you guys were having because you actually shared a lot of really great wisdom there about the stronger dollar has really been a headwin for a lot of manufacturing, so for people who export. But also some of the weakness in the dollar that we're seeing is due to the anticipation of tariffs. We've already seen like a 4% depreciation in the Chinese currency and just look back at 2018 to 19 as to what happens with currencies that the Chinese currency depreciated pretty significant. So that's almost like a shock absorber against some of the tariffs. The ones who ends up paying the price, more the manufacturers, the exporters, the farmers. I'm here in Wisconsin, and farming is really important for our economy. And so what does it do to U.S. competitiveness in those export markets?

I was a little surprised by the results that you had with that survey, 50-50. I was thinking, did you only ask two people? Like, one said it's good, one said it's bad. I mean, to see 50% was a little shocking. So you were stuck on the round number. on that because I think that what I had an opportunity to sit at our CFO council with a bunch of CFOs from different companies and everyone has a different potential experience with tariffs, right? Some of them are importing goods.

Some of them are sourcing their goods locally. And I don't know what the makeup is of that group of companies. But if you are importing goods, you're going to say it's terrible. If you are sourcing your goods locally, it's really almost no impact. So, and I think one of the things that I would respond to, Ms. Kelly Evans about when it comes to the dollar is one of the extraordinary things about the U.S. is how dynamic the economy is. We have companies in this country that benefit from a strong dollar and those that it will hurt. And it's very, well, who benefits is people who are

importing those things. Right? Their relative cost goes down, right? People are good for the cruise lines. Brian, maybe you talk about that. 40% of S&P revenues are derived from overseas. So it may have an in order an impact on the stock market. That is correct. And I think that's one of the key things is that the stock market is not the economy in terms of the composition. So you look at the 40% of revenues. The U.S. economy, you know, we don't actually export, you know, 40% of GDP.

It's a much, much smaller number, right? But also it's important to remember, that's just revenues. What about their whole cost structure? Businesses over the years have developed different tools and techniques for managing foreign exchange risk. They can, you know, locate their production facilities in other countries to sort of match the cost with the revenue in terms of the currency. Hedging instruments, the way they finance themselves. And so I'm not sure that tariffs are necessarily going to be as disruptive to the market rally that we've seen as maybe what a lot of people think at first blush that it might be.

Brian, do you want to talk through the stock implications of that? Yeah, I think that really one of the big ones is that really when we're looking at maybe the sweet spot as far as threading the needle between fairly high valuations on the one hand and looking at who has the most exposure to tariffs, you can look at maybe mid-caf quality. That's one of the areas that we really like or some of the asset light businesses. So they do have a little bit more ability to price for their particular markets that they're selling into. They're not necessarily importing a lot. So maybe some software, some of the industrials more on the domestically focused one. Those are two of the areas that we really do like. But when we look back at the first Trump administration, it was maybe the anticipation of the tariffs

that was the hardest for a lot of the businesses. And growth companies especially, they actually did quite well during the trade war. So that's kind of how we're positioning things here at Annex. mid-camp quality and yet also biased towards quality or towards growth because that's the parts that are likely best insulated from a trade war. Brian, help me out here as I try to qualify for my advanced economics degree here. I had a nice chat with Justin Wolfer's and I asked him, I said, Justin, why does the dollar increase in value? Why does it appreciate because of tariffs? And he explained to me because it creates a scarcity of dollars in the global economy.

that your answer as well? I think that's one of the answers. Another way to think about it is that if people are, if we have, think about it through the lens of the balance of payments, right? If we have a trade deficit, we have a capital account surplus or a financial account surplus, I mean, on how you want to do the accounting for it. And so if you impose tariffs, all of a sudden, if you're bringing in fewer of those goods, they don't demand as much of the, of U.S. dollars. We don't demand as much of their foreign currency. And so it's the relative. change. So the tariffs are likely to help bring about that adjustment. So I think that really the bottom line is that the foreign currencies need to depreciate relative to the U.S.

dollar to help offset some of the tariffs that you see because of the change in the supply and demand for those imports and for the exports. Okay, I know we're out of time. So if you want to depreciate the dollar, you would get rid of tariffs. That does seem to be a good first step. Are you listening to Kelly? But if you have to be. have a dollar that's too strong. If other countries' currencies are too weak, if China's currency is too weak, because for 20 years, that's been its policy is to take over global manufacturing through an artificially low currency, then why wouldn't tariffs be a reasonable answer to that? Well, I think that really what you can think about doing is maybe subsidizing

U.S. businesses through tax cuts, depreciation, you know, encouraging that. So not so much through tariffs, but is there a different tool to accomplish that same goal? I think that it's not necessarily the tariffs that China imposes on U.S. goods. It's more the state subsidies that they receive. And so maybe is it something that we can do with the tax code, the regulatory environment, to make it where U.S. businesses can be more competitive. That might be a better, longer term, and perhaps a cheaper solution to this issue. Kelly, I feel like if we keep working on this, we're going to come up with a solution. We've got today and tomorrow when I'll be here. I guess thank Brian Jacobson. I think so, Brian. You were in big help. Big help. Appreciate it.

Well, I'm going to read the transcript. skip later and we'll come back with new ideas. After the break, despite consumer frustration over higher prices, spending this holiday season did not slow down. MasterCard reporting a more than 3.8% sales jump blowing away expectations, but not Kelly Evans. We'll talk about that after the break. We'll look at the stocks which benefited most. Power Lunch is coming right back.

Welcome back to Power Lunch. Higher prices, not giving consumers from opening up their wallets this holiday season. According to fresh data from MasterCard spending pulse, holiday sales rose 3.8% over last year. For November 1st through Christmas, Eve, our next guest, sees some clear winners, and he joins us on set with his picks now. Simeon Siegel is managing director and senior retail analyst at BMO Capital Markets. You have winners and some losers that you think could be winners. But first, let me ask you about the 3.8. How do you think about that? Is that a great number,

good number, okay, number, bad number. So I've been enjoying this kind of Grinch Santa thing going on. Yeah. By the way, Kelly, during the holiday season, not as easy to please here. 3.8 to most people would be great. Is it? But here's the thing. You and I should care about inflation in a good way, not in a bad way, because in a good way, we call it full price selling. And so in discretionary retail, if you're charging more money, generally that comes

with higher margin. So we think about inflation as being a cost element. No, I wanted it to be 7%. I know. I know you wanted it to be, and then double digits. Because I felt, okay, 4% real 3% inflation. And then Steve said, well, actually inflation might be a minus 1. I'm looking it up now, by the way, goods inflation.

So you just keep talking. And so here's the point. I think, first of all, goods inflation, we should split apart between discretionary and stables. True. So if your milk is higher and you're buying less units, if your sweater costs more,

you're probably getting better margin for the company. In other words, a lot of people don't realize because needs inflation has still been so high in the goods area that actually discretionary

inflation has been, and actually it's so funny. If in my head I thought 4% would be a good number and deflation ends up being 0.2, then it will literally come out to 4%. You'll get your number.

And so that's one. Minus. 0.6. There you go. Interesting. Minus. So I think... So, 4.4.

So you're hitting your number. And by the retailers don't care. They just raise their price with inflation, and then the question is margin. Well, by the way, so you're the economist. You know this a lot more than I do, so I'm probably wrong, but I will tweak around that a little bit. Retailers don't raise their price with inflation. The price retailer said is what creates inflation.

Inflation is just the amount that we spend. And so if there's full price, if all of a sudden Lulu can charge 20% more, then on Lulu goods, there was 20% inflation. It's a scary thing when we talk about it in an economist term, but in retailer term, that means higher self. And it sounds like they actually did okay, is that right? Lulu all of a sudden has kind of come back. And it's been a surprise this year. So I saw your earlier guest call that out.

I think what's important to flag is Lulu's U.S. sales were flat. And so that's great because Lulu does a big business, but it's not greater than it was supposed to be. And so I think that, and this goes... Has the stock been on a turnaround lately, too? Well, because it also went down. Yeah. And so that's what I'm in terms of the winners and losers. So if we think about the stocks, I think the other thing to keep in mind with 3.8 is not only

inflation versus not. It's also an average number. And so what that means is, I guarantee you, Hoka and On are seeing dramatically better than 3.8. Of course. And Under Armour, Nike, Michael Coors, other businesses are seeing dramatically worse. And that's actually really good. Because during COVID, we got so trained to look for, oh, a rising tide's going to lift everyone. And so 3.8 means everyone's up 3.8. How were the discounts? Like, that's the big fear for a lot of retail analysts. Yeah, we cleared the merchandise, but, you know, at what cost? So for the companies that need them, they were there, and they were

worse. And that means the business is going to be worse. But people get that. I want to skip over with your winners. I want to go to the other category you have, which is, it sounds like the baby with the bathwater category. Is that the right way to say? Companies who have been thrown out, but you think have potential, because what I like about concentrating them is maybe their valuations are lower, so there's potential better returns if people get it right. Let's talk about those companies.

So the framework we need to take now in this Nvidia magical market is you're either going to pay up for a lot of companies and you're absorbing risk to the multiple, or you take this other side. And you say, I don't really want to absorb risk to multiple. I don't know how to price Apple at $4 trillion. Instead, what I want to find is underappreciated companies that people already think are not doing well.

And so for us, that's Under Armour. And there's a few of them. But, like, when I think about businesses that actually can benefit by giving up volume. And we talk about this a lot. It's like you have the growth vehicles. You're a brave man to say Under Armour. And you know what?

It's been working. Yeah, what's going on with that? So Kevin came back. Kevin Plank came back, the founder, pulled his Howard Schultz-ish type of a moment, but actually came back with some newfound appreciation for we don't need to grow at all costs. And so their new line is we're going to achieve more by doing less,

which doesn't sound sexy, doesn't sound Wall Street, It doesn't sound growth, and that's amazing, because neither does the stock. And so when I look at certain businesses, I can buy as much TJX as I want at whatever multiple I'm going to need to pay because the market's telling me it's a great business, no surprise. That's one of your winners. That's a winner. Right. Or I can look to the other side of the spectrum, and I'd say, you know what, Under Armour is actually in the middle of a turnaround.

People have negative sentiment. Emotionally, we think Under Armour is a broken brand. Especially if Nike's weak right now, what a great opportunity, potentially from America. Is Nike one a year? So that's really interesting. Nike being great, I actually, I want Under Armour to give up volume. I think the fact that Hoka and On are taking volume doesn't scare me. So the fact that Nike might give share is interesting.

But what I want to do, I want Under Armour to say, you know, we're too big. Our logo is too ubiquitous. Our value, right? We have deflation built into the business model. Let's pull back. Let's sell less charge more. Price elasticity. And so that's really interesting.

To any of these companies ever come back? I sort of, the way I think about things is you get these retailers, they're flavors of the month for several years. Then they go down and they never seem to regain their luster. Is that possible? with any of these companies? So if I told you Under Armour is still, it won't be next year on purpose, but is still at its revenue peak? I mean, Under Armour is one of the largest brands in the history of time.

They just don't make any money on it. And so what I love about retail, what I love about the sector, what I love about my job, it's the accessible sector. So people think, oh my God, I hate the brand. It doesn't stand for anything. And then you look at, well, there's $6 billion of revenue telling you otherwise. And so that's where you can make money. What's also been fascinating to watch, and I appreciate this as well, is the cyclical nature

of it and almost the generational effect. So all of the things that were cool when we were kids in the mall, and Body Works and Abercrombie, they went through this fallow period, and now they're back. So with a name like Under Arm, you almost feel like there has to be some equity inherent to the fact that they've been successful. And at some point, they can kind of bring that back. And I don't know exactly what the right moment is or how. In the least cool sentence, I could probably say, you know what's cool? Gross margin is cool.

Yeah. Not revenues. When I was a kid, it was the gap. That's back too. To the point where they would go to a party and some of them were wearing the same weird pants. Yes. And that was, and we've talked about it. I don't forget that.

Melo Yellow, like that was all marketing. That was Mickey Drexler, and that was this idea of, like, you have all this brand equity, but brand equity does not necessarily give you revenues. It gives you margin. And that's what we're looking for. Under Armour has a lot of revenues in my world. Let's start a quote down. What's cool is gross margin.

I like that. Preface by the least cool commonized. Do they need to do a huge marketing spend? I mean, that's the only problem with marketing. They will. They will. You know, back to margins. So you lift your product margin.

So you improve, you get inflation. And so we're all happy about that. You spend more on marketing. You cut your OPEX and you have a much higher earnings number. We'll see. Make you sound pretty easy. Good luck, Kevin Plank. Tower of Power saying what is hip. Gross margin is hip, ladies and gentlemen. Thanks, Simeon Siegel of BMO Capital Markets.

Even with the holiday done, most investors are actually just starting to build a shopping list for next year. What do they want to add to the portfolios discussions like we were just having? We will explore that in Market Navigator next. Welcome back. Quick check at the markets. We're seeing if we can turn positive out. It wouldn't take much just a couple of points for the major averages, but they remain in the red this afternoon. kind of not as bad as it was this morning, though. Energy has been the underperformer this year, the second worst performer up barely a percent.

And our next guest is taking a deep dive into one name in that sector, Occidental Petroleum, nearly 20 percent down on the year. But got a boost last week when Berkshire Hathaway upped its stake in the company. Here for more is Mike Coe. He's the chief strategist at open interest.pro. Mike, I'm so glad you're tackling this one.

It's a hugely controversial, not controversial, but everyone scratches their head about it. How could Buffett pick a name that's done so poorly and stick with it? What do you think is going on here? Yeah, I mean, obviously the energy sector, as you pointed out, it's had a tough year. It has underperformed. And this, even within the sector, is actually one of the names that has underperformed even more than the group has overall. Now, a couple of reasons for that.

I mean, oil prices really haven't gone anywhere. And that's largely because the energy markets are very well supplied. You know, you have the United States and our demand has remained essentially flat. in a lot of other places, that's also true. All of that's going on with the backdrop of North American oil production being essentially at all-time highs. I know that there was a lot of talk, of course, with the incoming administration, that it would be more energy-friendly. But right now, we are already the largest producer in the world. But, you know, I also think that, you know, we're probably going to see the supply-demand dynamic remain relatively stable. And in a lot of other areas of the

market, they've appreciated largely because we've seen valuations rise. So the, you know, the turn on earnings or the turn on free cash flow has gone up, this is actually a case where basically the valuations have largely remained the same. So it's trading a little less than 15 times forward earnings, probably have a free cash flow yield somewhere in the neighborhood of about 8%. So it's reasonably valued here. And, you know, there are ways to play it, I think, if you think the oil markets are going to remain stable. So that's what I was going to ask. There are a lot of people who have been frustrated with their energy trades might feel like throwing in the towel. Others might think, well, maybe is now the time to look for value, how would you be trading OXIA or other names in the space?

Yeah, I think one of the ways that you can look to play at if you're going to be interested in using options and also collecting a little bit of premium. A lot of these names tend to be good dividend payers or good yield stocks. And another way you can actually collect some yield on stocks is by selling upside covered calls if you already own the stock. But if you don't, you could actually sell cash covered puts. In this case, I was looking out to the February 7th weekly 47th. strike puts, you could collect about $1.20 a share for those. Worst case, you're going to own the stock at that $47 strike price, less the $1.20 collect, which is going to be about $4580, which means your basis in the stock would actually be lower than Berkshire Hathaway, so a relatively

attractive entry point, if you will. And you're going to collect about a two and a half percent standstill yield. So that's two and a half percent of the current stock price between now and February 7th. Annualize that, and that's pretty attractive. And one reason I picked the February 7th expiration rather than going out to the February regular is that the stock is going to go X dividend the second week of February. And they also report earnings at that time. And stocks will tend to be more volatile when they report their numbers. So this is a way to collect some yield before you get that more volatile earnings week. That's super interesting. And I think a lot of people would understand why you're approaching it that way in particular. Is there anywhere else you're looking

across the energy space or does this one in particular jump out? Yeah, I mean, I think there's a couple places that people could look. You know, I think the oil service index in general, that hasn't done particularly well. And, you know, you have companies like Halliburton that are in there. They focus largely on North American sort of land oil services. And that remains, you know, a very active space, of course. You know, we're producing about 22 million barrels of oil equivalent in the United States, as I mentioned before, by far the largest producer, significantly outpacing Saudi Arabia. So I think the oil services companies also are probably going to be fairly stable here. There's going to continue to be demand. I'm not looking for explosive

growth because, as I said, I think the environment's well supplied, but I think strategies like this one could apply to more than, you know, just the E&P names. This is a diversified EMP, but you could also look to services to do a similar strategy. All right, Mike, thank you. Appreciate the ideas. Mike Coe joining us for Market Navigator. Steve. Thanks, Kelly. Coming up, we already talked about who won the holiday in physical retail, but what about on the digital front, which were the hottest apps in the app store? We're going to come right. back with some answers. Welcome back to Power Lunch. We talked about what sold well in physical stores. Now let's turn to the App Store. People get gifts and often they need to download an accompanying

app. Steve Kovac looked at the hot tech gifts and the companies behind them, Steve. Hey, yeah. And it's not just the accompanying app. It's people getting new iPhones and then they have to download all the apps. So we kind of get a idea of what people are downloading. Number one in the app store, by the way, over the holidays, it was meta. And this was, by the way, I've been tracking this. Because of the Raybans, right? No, because of the VR headset, the Quest. Really?

So the Raybans one, there's a separate app called MetaView for that, for the Raybans. That was in the top 40. Okay. But number one at the App Store, I think it might even still be number one today, was the Meta Horizon app. That's what they call it. That's the one you use to set up your VR headset. How expensive are these headsets?

I think 200 might be the cheapest one. There are like two different models right now, but I think even the cheapest, cheapest one is still in sell. But point being, is that, you know, people went for those. I was looking for the Meta View, just like you, looking for that. Some other interesting ones, though, that I saw. Lemonate. Have you heard of that one?

The insurance app? No, no. That's Lemonade. Lemonade with the numeral eight. This is another video app made by TikTok. And I noticed that that also got up really high in the rankings yesterday, as high as number two that I saw it. And the way I read this was it's very clear that this is a TikTok app, but the way I read that is kids know it's potentially going to be banned on January 19th,

So let's find an alternative. Unclear if Lemonate is part of that band, but there they go. There people are trying that one. And some cool fitness stuff, too. You have Garmin up there. You had the aura, which for those smart rings that track, things like that that were really interesting. And then the other one, this, I had no idea what this was. Tonys.

I asked you about this in the green room earlier today. I thought you made the chocolate. No, no, T-O-N-I-E-S. This is a, I'd say, it's almost like a digital remote speaker, like a Bluetooth speaker, and you take these little characters. these little cartoon characters, there it is, and you put it on top, and it tells the kid a story from that character.

It's kind of like a new age Teddy Rucksman. That's the best way I can really... Like a podcast? Kind of like a podcast. You put the little character on top. It tells you the story. You take them off, and then it'll pause and pick back up where you started.

It's easy for super young kids to use. That's cute. It's a really popular and buzzy thing, but I've been talking to parents for the last 24 hours. Do you know what this is? You didn't know what it was, but some parents are like, oh yeah, my kid loves their Tony's.

So Steve, is this sort of, for lack of the term, metadata in the sense that we can learn about the sale of physical things. Exactly. By looking at whether or not, because I'll tell you what, I downloaded the app for my dehumidifier. Yeah. Which is so exciting. But Dyson was one of the top apps too.

I'm trying to keep my guitar room humidifier. We need it for the piano, but ours doesn't have it out. And so now I've got VE sink on there. But now you can see that I bought a humidifier, sorry. Not a dehumidifier. To your point, Dyson was one of the, I don't. at least in the top 50, I think I saw too. So that means, yes, connected vacuum cleaners.

Alexa was also very high at the top. I think it was number two last night when I looked. Again, people not just getting echoes, but they're getting those smart appliances that need the Alexa app to kind of talk to each other. It's really like a little window into society. And by the way, to your point about people who are also just getting Apple products and downloading things.

And Casey Lewis last hour said one of the top selling items for Gen Z and everything she tracks was actually Apple devices. So we're sitting here going, Why is the stock approaching $4 trillion today? But it could be as simple as that. And one other data point here, too, we looked at the Android store as well. And it's all skewed there. But to your guest's point, yes, iPhone dominates here, especially among young people.

I think last I saw it was like 80% market share for like Gen Z or something like that. And one of the top apps, the top 40, I believe, on the Android store yesterday, was move to iOS, which is an Apple-made Android app that helps you move all your data. from your Android phone when you buy a new iPhone. So that's a good sign for maybe Apple. That's a great sign for our switches. I just want you to know I'm out of water in the humidifier and I'm only at 22%. You got to call your wife and have her.

No, you need the, what's the name of the Musk, the Musk robot at home? He can get that reading for you and then go. Optimist. Optimist. Thank you. So you're saying for the app, I need another app. Optimist will solve it. And a $20,000 human order about it.

But you can handle that. You're always full of great solutions. Exactly. By the way, real quickly, on the market cap, Yes. We were talking earlier about what, what do you think the significance of Apple reaching when it ultimately does a $4 trillion market capital? The same as it was when it hit three and two and one. It was the first one to do it, and it is kind of this moment to kind of talk about and celebrate. And by the way, Apple is the first

to hit trillion, and now it's likely going to be the first to hit $4 trillion. And I keep going back to where we were, you know, 11, 12 months ago, where Apple was just the laggard in all the Mag 7 that we talk about it. It wasn't until they started telling a real artificial intelligence story that that turned around and now there's just good vibes around Apple. And there's literally no news. Consumers that they're into the Apple. No, I'm hearing the opposite. That's the crazy part.

Like, it's not that fuzzy. So the street is valuing something that does not appear to be valued at the street. I don't have solid data on that and this is something I'm pressing. But if it's like if you see these these conversions, okay, the kids want an iPhone, whether or not it's because of AI, they still want, look, having the AI probably just means it's the latest and greatest. Right. That's all that means.

And by the way, starting this year, everything you buy that comes from Apple is going to have AI in it. So it's almost a moot point. That's like saying, oh, my God, my iPhone has Wi-Fi. It's not going to matter eventually. But the bull case is, wow, people are going to want this AI so badly they're going to run out and buy it. We just don't know if that's happening yet. And we're not going to get our best insight into it until Apple reports earnings either end of January or early February. And then we get the full, you know, picture of what this looks like.

By the way, more AI to come from Apple. They still haven't released everything they announced yet. That's still that supercharged Siri, the ability to talk to all the apps on your phone. That is still to come. We don't even know what that's going to look like yet. Well, I do like the summaries. I find the summaries. I do.

I like them. Do you get the summaries? No, what's the summary? So it'll say, first of all, these things have Wi-Fi. Is that what you just said? Yeah, yeah. It's crazy, right? Yeah.

What's the summary? So let's say I get a string of 27 text messages. It'll basically just say, you know, husband says check the humidifier. And it'll just boil it down so you can glance. said it go, okay, summarize news updates, things like this. The problem is on the news updates, it gets it wrong. BBC got really mad because they gave that wrong headline about Luigi Maggione saying he shot himself. Yes.

Which didn't happen, of course. You mean AI got it wrong. AI got it wrong. They were summarizing BBC notifications. BBC editors had nothing to do with it. It was Apple AI interpreting it incorrectly. This is all going to turn out just great. I'm sure.

Like, what could possibly go wrong? What could possibly go? Yeah. Steve, thanks. Let's get over to Pippa Stevens. Thank you, Steve. Let's go, Pippa Stevens for a CNBC News Update. Hey, Steve, officials in Hawaii are investigating a body found in a wheel well of a United Airlines plane.

The jet took off from Chicago and landed in Maui on Christmas Eve. Once it arrived, a body was found in the wheel well of one of the main landing gears. It's still unclear how the body ended up there. The Finnish police boarded an oil tanker linked to Russia as they investigate whether it damaged a Baltic Sea power cable. Officials say the cable, which carries electricity between Finland and Estonia, was cut yesterday. This is part of a slew of disruptions to undersea cables that are being investigated as acts of sabotage. And Kim Kardashian's spell and private equity has quietly come to an end. According to regulatory filings reviewed by Axios, she is no longer managing Sky Partners,

a private equity firm she co-founded two years ago. The firm originally planned to raise at least a billion dollars to buy consumer companies, However, it only raised $121 million through April and closed on just one deal. Steve, back to you. Thank you, Pippa. Remember, you can always hear us on our podcast. Be sure to follow and listen to Power Lunch wherever you go. We're going to come right back.

Welcome back. Yields have settled down a little bit. The 10-year was pushing, I think, 462 or 463 this morning, which was helping or contributing to why stocks were struggling. It's come back down. We're around 457. We did have some good economic news. Jobless claims were better than expected. Continuing claims, though, did hit the highest level in more than three years, and that's been a kind of quiet trend simmering in the background. And by the way, that could also be why markets are feeling a little bit less, you know, hawkish this afternoon. We'll be right back here on Power Lunch. Stay with us. Welcome back. It's time for three-stock lunch. Eric Clark is here to do the trades today. He's a portfolio manager at AccuVest Global Advisors. Eric, welcome to you. We've been talking a lot about Apple.

Apple's charged to $4 trillion today. So what would you do with the stock here? You buy it. I don't think you'd want to short it, but what do you think? No, I would not want to short Apple. I mean, it's the greatest consumer staple ever created. So we think it's a buy here and certainly a buy on any dips that come, where they're just beginning this AI refresh cycle.

And it's not just the iPhone, you know, it's across all the devices. So we think this is the first time they're going to have some pretty good multi-year revenue growth. at a time when, yes, the stock's at all time highs. Yes, it's 30 times earnings, but you would expect a great business that's a leader in a really important category to be, you know, a little more expensive than the market because they're a solid business with solid operating metrics, just beginning a multi-year growth cycle. All right. Next up, we have Target. The stock is one of the best performing retailers today, but shares are still down almost 13% over the past three months. What do you do with that one?

Well, I think, you know, I think you can hold Target here if you own it. But inflation's been difficult for Target. They were the losers when Costco, Walmart, and Amazon were kind of the winners here. But, you know, at 14 times earnings, they certainly need discretionary spending to come back a little bit more because that's what they're more focused on. But I think you're getting paid, you know, to wait at 14 times earnings. And they're finally getting their own. operating metrics and their margins back to where they used to be, lowering prices to drive

traffic into the stores and, you know, having operating efficiencies on the other side to keep margins high. So I think it's a pretty good long here. I'm pretty good long for Target. That brings us to a little bit, I don't know if this is a tougher one, but Coinbase has been on a tear lately, more than 50% over the past couple months, but it's super volatile as well on movements in Bitcoin, although it's only down one and a half percent today as Bitcoin goes below 96, And Mark, Mark with below that, Mark, Eric, what do you do here with this one? I think it's a buy, you know, it's 20% off the highs, which is great. We don't like the chase moving trains.

So if this were at all-time highs, I think I probably would be a little more cautious. But 20% off knowing that it's a long theme of investors, institutional and retail, starting to get more engaged with crypto, plus the stable coin opportunity with, you know, multinationals all over the world, able to move money around the world more efficiently. I think that's a pretty interesting. You know, this would be in our innovator brand category because it's a younger company and a younger, new evolving market. But I like the discount after a, you know, a pretty strong run. Is there anything you don't like, Eric?

Well, we don't like second tier retailers. You know, and when inflation stays high, you want to stay away from lower quality companies, you know, companies that have too much less. leverage or that are just selling marginal products that don't have a lot of differentiation. So, you know, that could be two-thirds of retail. So we're certainly, you know, staying up in quality and up in brand relevancy and avoiding the rest. All right. Now, in honor of the holiday season, we're gifting you a fourth stock in today's three-stock lunch. We're asking Eric to give us one

of his top picks for the upcoming year. And he went with Amazon. The stock is up just shy of 50% in 2024, just for the record, that's disinflationary if you do four stocks over a three-stock lunch. But, Eric, why is Amazon one of your top picks? Well, you know, it's been a top pick for the last couple of years. We made it a big overweight in late 22 when the stock was down meaningfully, and it really shouldn't have been. So the last two years, it's just caught up to where we think it always should have been. And now I think, you know, 250 to 300, given that retail is still doing well.

margins are still expanding. International is starting to get profitable on a sustainable basis. The AI and Cloud Initiative is just beginning. And they're spending a lot of money because they see a good ROI on it. So I still think it's the best upside for all the MAG7 names. It's a product that we all use on a regular basis. And they're kind of firing on all cylinders. And we still think there's a lot higher to go on this one.

Eric, thanks very much. Happy holidays. Eric Clark Accivas global advisors portfolio manager. Before we go to break, a quick joke that I saw Facebook mean. Due to inflation, dirty deeds would no longer be done dirt cheap. It's a 1976 ACD. I was going to say when you said that four stocks instead of three was disinflationary. Some people think that's inflationary.

Why? Because there's more. But now that there's more for the same price, but it was longer. Four for three. That'll take that deal out. I don't get about this all night. All right. Coming up, Disney's Mufasa, getting off to a disappointing start at the box office.

And Netflix's NFL big moment. The details will return. I saw the Dylan movie. Welcome back to Power Lunch. Mufasa ruled the jungle on the holiday box office. But the early numbers were a little disappointing to some for more on what this means for Disney. And the 2025 box office, let's bring in Julia Borsden. Julia, what happened over the weekend?

Well, Steve, Disney's and Mufasa, Tom the box office Christmas Day. This is after it opened over the weekend behind Paramount's Sonic 3. But with nearly $15 million at the domestic box office Christmas Day, Mufasa is now on track to top $200 million globally, despite that slow start. And yesterday, Disney's Searchlight Pictures, a complete unknown, the Bob Dylan film, open to $7 million, and a lot of awards buzz. As this year, Disney returned to top the box office market share. Disney's studio is, in fact, have estimated 25% market share this year, according to ComScore, with three of the top-five film. Inside Out, Deadpool v. World Marine and Moana 2, which today crossed $820 million globally. But next year will be the ultimate test of Disney CEO Bob Eiger's focus on turning around the studio,

as it expands from releasing eight movies wide this year to 12 wide releases next year, including sequels to Captain America, Zootopia, and Avatar, what ComScore calls Disney's best slate since before the pandemic, a slate which could lead the whole whole industry back to pre-pandemic box office levels. Now, Disney shares have lagged the S&P 500 since Eiger restructured the company two years ago, but shares are up 18% in the past three months for performing the market in that period. Kelly? So Steve saw you saw, did you see the movie?

I saw the Dillam movie, yeah. Complete, terrific movie. Was it? But if you're a big fan or do you think for anyone? What I loved about it is all these music biopics, none of them put the music at the center. The music was at the center of this. It was really fantastic. And Timothy.

Shamillet. Thank you very much. I know something about that. He does an unbelievable job actually singing the Dillon stuff. He deserves an Oscar just for that. Wow. It's amazing. Do we know the ratings, by the way, Julia, for the NFL Christmas games yet?

We don't have the ratings for the NFL Christmas games. Yet we are expecting Nielsen to issue a report, at least on the domestic numbers, for how many people streamed those games on Netflix at around 5.30 p.m. Eastern today. But the early indications for those games are strong. Netflix reports that nearly 200 countries tuned in to the Netflix Christmas Day pregame show, and Netflix says that during the Chiefs versus Steelers game, nearly a third of Netflix's concurrent viewers globally were watching and that viewership was behind only the Jake Paul Mike Tyson fight. Netflix also saying that they had more concurrent viewers of any Christmas than in the past four years, thanks to those games. Now, Netflix is bringing in an estimated $150 million in ad

revenue for yesterday's two games, which is the same as it reportedly cost to license them, though that does not include the cost of Beyonce's halftime show. But all of that spend is expected to bring in not just the ad dollars, but also more subscribers and also keep current subscribers happy. Netflix is continuing its investment in sports just five days ago, signing a deal to show the FIFA Women's World Cups in 2027 and 20, 2013. And then in January, Netflix launches its new WWE shows with its live WWRWA show streaming starting on Monday nights. And Netflix is using its sports investments to promote its original series like Squid Game, second season, which premiered today conveniently on the heels of those NFL games.

But this is the last quarter that investors will know whether or not these programs bring in new subscribers because Netflix is going to stop reporting subscriber numbers starting next year as the company works to shift his focus over to his profitability and as advertising becomes a key second revenue stream behind sub revenue. They're growing up, Steve. Steve loved the Christmas NFL games. I did not. I think

the bridge to and I should not own every holiday is my thinking. I honored to be here in Tyler's chair. This was wonderful, Steve.

Thank you. Closing bell starts right now.