Power Lunch - Dow dips in choppy trading ahead of election 11/04/24

Episode Date: November 4, 2024

Stocks struggled to hold their ground on Monday as investors geared up for the presidential election and a potential Fed rate cut later this week. We’ll track all of the action for you. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Tyler Matheson. So glad you could join us. Stocks are lower today to start off, well, let's call it a big week for the markets, big week for the country, maybe even the globe. But off the worst levels of the day. Election tomorrow, Fed meeting on Thursday, so the agenda, Kelly is full. You know, I love watching this play out tick by tick. You can overlay the predicted odds or pick your favorite platform or whatever, the one you hate the least with what's going on in the market. DJT shares are now up, I think, 13%. The 10 year is five bips away from going positive on the session. So Harris came into the trading session with all of this momentum, and now in the afternoon hours we see that trading.

So we're just watching all of this play out, literally tick by tick. It's very, very fun, honestly. Some big changes are coming to the Dow as well. On Friday, Nvidia and Sherwin Williams will join the index. Intel and Dow Inc. are coming off. And yes. The Dow Jones gets a fresh coat of paint here, I guess, is really one way of looking at it. the Dow component that always made things so tricky when you were talking about it.

Yeah, it's the Dow. All right. And Invidia now briefly pulling ahead of Apple in the market cap race. And there you see, it's what is the 3.389 versus 3.382. It hasn't closed above Apple on that metric since June. So Invidia doing very nicely. Thank you very much. But neither are suffering, I wouldn't say.

It's impressive. In market cap. And we will talk to former FDIC chair, Sheila Baer. She's warning about the national debt saying it could cause the next financial crisis. And neither of the candidates is addressing it. It is always, I think, leverage and debt one way or another that leads to trouble in markets and for economy. Yeah, she's been vocal on this for quite some time, but I think it needs an airing and kind of dive deeper into what it could look like under either administration. She's written very passionately about it.

We welcome her back. And we start with the markets, which are lower today. although the NASDAQ just went positive. The U.S. presidential election is tomorrow, of course, and the Fed decision is on Thursday. The Fed is expected to cut rates for the second straight meeting. Only a quarter point this time. What does it mean for investors?

Let's ask Rich Bernstein. He is CEO and Chief Investment Officer at Richard Bernstein Advisors and our own Michael Santoli is here as well in the House. Mike, it's great to have you. Rich, let me just start with you. Your protege, Michael Cantowitz, the other day, said he was not a big fan of small caps here. We were talking about rates and so forth.

But I know that you are, and I wonder if you would still be as vehement about how attractive they are now as you were before. Yeah, Kelly, look, I think that markets tend to broaden this profit cycles accelerate, and the profit cycle is accelerating. You know, I always try to point out to people that the cycle, by definition, is determined by cyclicals. And so if you believe the profit cycle is accelerating, which it is doing, and if you think that's going to continue for several more quarters, then it pays to have cyclicality in the portfolio.

And smaller caps are more cyclical than larger caps. I think everybody knows that. And so that's why we favor still small and midcaps. Mike Santoli, why do you think Warren Buffett is selling so much stock and raising so much cash and ending buybacks? What's going on there? What's he telling us? I think it's definitely a series of things going on, both specific to Berkshire Hathaway and then in general in terms of the market, general atmosphere. Clearly, Buffett and his colleagues don't see great amounts of value in large-cap equities, anything that would move the needle to where you'd want to make a big bet. Clearly, he always says he would love to buy an entire company or more than one company if the price were right and if there was a willing seller and if it fit. None of that's

happening. And therefore, I think he wants to reduce some of the outsized bets within the public equity portfolio. That's been a seemingly a priority all year, meaning we can't. We can't came into 2024, Apple was almost half the portfolio. It had gone up so much. It's also very expensive. It's 30 times earnings versus, you know, 15-ish probably when he first bought it. So I think a combination of, you know, selling down some of the outsized positions and maybe more expensive ones, and then the cash, you know, he's happy to hold it and collect T-bill rates while he waits, also positioning the company for what comes next. So what I hear you not saying, to maximize the flexibility. What I hear you not saying is that he is not making a broad call on the markets here,

that it has much more to do with the internal composition of his portfolio. That's the way it would look to me. Obviously, if he felt as if the U.S. economy were about to accelerate and all of a sudden it was going to make things look cheap based on today's prices, he would think otherwise. But I don't think it's really a market timing call in any acute way. Rich, is there anything you'd add to that with the S&P? We talked about this last hour, but the S&P at what, 24 times trailing earnings versus 16 a couple years ago?

Right. Well, I think, look, I don't know. motivation for selling Apple per se out of his portfolio or out of Berkshire's portfolio to be more accurate. I think that, you know, we're an environment where people are embracing risk. And historically, that's not been the best time for value investor like Warren Buffett, right? You tend to shy away from those kind of markets. And for instance, if you look at private client equity beta, which Merrill Lynch puts out, the beginning of the bull market, it was 0.75, much lower risk in the market overall. Today, it is a whopping, absolutely whopping 1.45. So in that environment,

you should be expecting people like Warren Buffett who have big gains to be selling some of those big games and diversifying the portfolio. I really think that's what he's doing. And I think if you're not a momentum investor, I think that's a very prudent thing to do. One of the things you point out, Rich, in a very interesting Financial Times op-ed, is that that when you start feeling comfortable about which sectors are going to win or prosper the most under this election scenario or that's election scenario, usually you'd be wrong. It's not only wrong, but sometimes polar opposite. I'm sorry, I'm kind of laughing here, and I don't mean to belittle any candidates or

or any past presidents or anything like that. Please don't read this the wrong way. But it's sometimes, I think, just incredibly funny. So I'll take two recent examples. 2016, President Trump vilified the technology sector and talked about drilling. Technology turned out to be the best performing sector during his administration and energy the worst. Well, in comes Joe Biden talking about ESG and clean energy and anything else. And the energy sector turns out to be the best performing sector.

I mean, I don't think anybody would have guessed that technology would be the best performing under Donald Trump. And energy would have been the best performing under Joe Biden. But that's exactly what happened. So sometimes it's actually quite funny. So I would, I mean, I don't want to be a Debbie Downer and try to dismiss all the analyses that everybody's doing right now. I would guess that a fair chunk of them are going to be wrong. Mike, what would you add to that? What are you going to be watching?

You know, I think the market has been trading, especially in the last few days, the way you would expect if nobody had an edge and it was a virtual coin toss. Right? So in other words, you mentioned earlier, well, it looked like DJT was going to be for sale again this morning. Well, once it goes down three days in a row, everyone feels like, well, that's maybe not a 50-50 bet anymore so we can buy. So it's all tacking in this direction. I don't think I agree with rich. I mean, bull markets, you can look back and say there was a certain maybe temporary change of character in the market when a given president were elected. 2016, you definitely got this reflation trade. It was going to be a higher metabolism economy, higher nominal GDP. Banks and small caps and cyclicals did did better. but it didn't last. It wasn't the story of the whole cycle. And so bull markets are not kind of born or killed by whatever administration gets turned over. Rich, we're going to have on Sheila Bear, who's very concerned about the level of national debt,

as many people are. Are you? I think, well, Tyler, there is nothing good to say about the levels of debt and interest payments and everything else. I mean, I think anybody who says that it's not an issue is kind of diluting themselves about that. But that being said, I think the important thing that I would point out is this is not a new issue. We are not on like the edge of an abyss that we're going to fall into and never come back from. This has been an issue now for 13, 14 years in terms of the downgrading of U.S. debt and higher U.S. interest rates as a result of that downgrade. That was 13 years ago. And the debt to GDP issue has been growing for 40 years.

And you can see in every administration except for one, and that would be Bill Clinton's, that we added more debt to GDP. Bill Clinton was about the only president who lowered debt to GDP without inflation, right? You can talk about inflating the way the debt, but then you'd be looking at LBJ and Nixon and Carter who inflated away the debt during their administrations. But this is nothing new. It's been a slow bleed on the U.S. economy. It has hurt our competitiveness for 13 or 14. years already. A lot of the problems that we now have are a result of that. But the notion that we're going to wake up tomorrow morning and we're going to end up in some abyss, I think that's

a bit overdramatic. It's more like a slow bleed. Just going back to that, Rich, I think it's true. Correct me if I'm wrong, that they were able to shrink defense spending in part to support that effort, which I don't think we can do right now. One of the trades I hear people wanting to put on with a Harris administration is an oil trade because of global uncertainty. But then we've had so much of that the past year and the oil price remains at an nadir. Right. Right, right. So you have to remember with commodities like oil, it's really a matter of supply and demand. And we know that Chinese demand has been weaker than people expected, you know, six months ago, a year ago, something like that. And I think that's really hurt the price of oil. But I think, you know, what you're touching on here, Kelly, is this called de-globalization theme, which we're huge proponents of.

You know, personally, I think it's the best investment theme out there right now is de-globalization. and the notion about whether that's in defense or whether that's in domestic production or anything like that, I think is the best investment theme out there. All right. Mike, any final thoughts? You want to leave it there? No, we can, I mean, we can more or less leave it. Although I would point out that this has been, we haven't really had the seasonal and pre-election

jitters and weakness really at a market-wide level that you might have expected. No. Right? We're 2% or 3% below the highs in the SPP. Below the surface, there's been a little more indigestion, but it's really just set this market up to just kind of kind of react. And I think it's because everyone's on board with the idea. Once the election is a clearing event, then the final two months of the year tilt higher, at least based on historical odds. So everyone's not wanting to be out for when that starts, if it starts. Let's hope it's a

clearing event. Right. Let's hope it gets cleared. But even at that, even at that, we've been talking for so long about how there might not be a resolution. I just wonder if even that would be a jarring surprise. All right, Rich, have a good day tomorrow. Good night tonight. Mike Santoli, same to you. Go Rangers. Election Day is Nearly upon us, some late shifts, but the polls do remain really close. Our next guest says no outcome would surprise him at this point. Power Lunch. We'll be right back. All right, welcome back to Power Lunch, everybody.

We're just one day away from Election Day, as you surely know. Polls indicate a very, very tight race in all seven of the so-called swing states. And getting a lot of attention over the weekend was Iowa. A new poll there shows Harris at 47% versus 44% for former president. But the final New York Times Siena polls show no clear leader in those seven key battleground states. Iowa's not one of them, by the way. Our next guest says no election outcome would surprise him and says the nightmare scenario would be one or more battleground states decided by a very slim margin. Chris Kruger is managing director and Washington Research Group strategist at TD Cowen.

Chris, welcome. When you say a very slim margin, in the last election, 11,000 votes in Georgia. Georgia was considered a slim margin, but we both remember Florida in 2000 where the margin was something like 600 votes. That's right. So if you go back and look at there were approximately 40 recounts since that Florida recount in 2000. The average number that the vote total changes is 551. So anything inside of 1,000 votes would, you know, be a rough outcome. You know, anything, you know, 5,000 and above, you can breathe a little easier, 10,000 and above, you should be free and clear.

Nevertheless, one could certainly anticipate that there will be challenges to the voting, to the vote counting, to the results, no matter which side wins, right? I mean, I can't imagine that either side, if it is as close as the polls indicate, that either side is not going to raise some challenge if they are on the losing side. Yeah, well, I think there are probably two areas to focus on here. First off, you have active litigation. It's something like 175, 185 lawsuits already filed across the country. But then the second part, you do have a relatively hard and fast deadline set in statute.

So the first one is December 11th. That's when counting has to stop across the nation. December 17th is when the electors meet in the state capitals. Going back to 2000 in Florida, that was really the catalyst that got the court involved. And then January 6th is when the new Congress certifies the presidential. So you do have three dates you can look to. The problem is that they don't start until December. That said, Chris, I mean, and we see all the parts of the country.

they're already boarding things up and anticipating protests, and obviously hope that doesn't happen. What would you be telling investors to watch for tomorrow evening? What would be some early signs that is breaking one way or the other? Yeah, look, I mean, I actually, I'm reasonably confident that we will have some clarity by the time the market opens Wednesday morning. That's not because the counts are going to be done. They're definitely not going to be done. Pennsylvania will probably take until the weekend. Michigan will probably take until Wednesday night.

Arizona might take until the following week. But there are, you know, any number of counties. We've got 45 house races we're watching in 34 counties, extrapolating, you know, the numbers out of those in the early morning hours. And we should have some clarity. If we don't have clarity, we're into that second scenario where you're literally, you know, inside of 5, 4, 3,000. and we could well, you know, be in recounts. Since you mentioned Congress, congressional races, Senate races, what do you think is going to happen there? I think for the first time in American history, the House and the Senate could flip to opposite parties in the same election. That's not because of waves one way or the other. It's just because of geography and math.

When you look at the Senate map, it's really good for Republicans, and it's a 5149 Senate. So you have unbelievably tight margins in the Senate, and you have arguably tighter margins in the House. You have 435 members in the House. And when all is said and done, it's basically a three-seat margin. The issue for the House is that unlike the presidency and the Senate races, a lot of that geography is in very blue parts of the country, specifically California and New York. of the 45 most competitive House races, 10 of them are in California. California doesn't close until 11 p.m. Eastern. Mail and ballots have until November 12th to come in.

So, you know, we could have a pretty good handle on the White House, on the Senate, on the morning after the election. The House could take a while. Very interesting. So you foresee the possibility that the House would flip Democratic. and the Senate, Senate would flip Republican. And then, of course, obviously, the big enchilada is the White House, and that could go either way. That's right.

I mean, and that's largely based just because you have the tightest margins in the Congress since World War II, and the geography is basically inverted. The Senate, again, good for Republicans, the House, relatively good for Democrats. There are a handful of states we're watching early, not because, mainly because they're all on the East Coast. early and they all count early. So Virginia, Florida, and North Carolina, three good states to watch because they close at 7, 7.30, and then 8 p.m. Virginia, you've got two house races there in Fredericksburg and Virginia Beach. If Virginia's not called by like 8 p.m. for Kamala Harris,

that's a really good sign for Donald Trump. Florida, you know, there's a key Senate race there. If Florida is not called by, you know, call it midnight for Donald Trump, that that's a really really good sign for Harris, right? So Florida's kind of a reverse of Virginia. And then North Carolina counts relatively early. There's been a lot of focus on Pennsylvania for Harris. You know, North Carolina, Donald Trump was there this morning. Donald Trump's math to 270 or is arithmetic to 270 electoral college votes really tough without North Carolina. That's the first of the seven battlegrounds. So keep an eye on those three. Hopefully we'll have, we'll have, well, have some clarity by, you know, 11 p.m. 1130.

All right, Chris, that's an optimistic outlook. I like it. Chris Kruger. Thank you so much. Remember, CNBC will be live all night on election night. We will have the results as they come in and reaction from the biggest names in business. All starts at 7 p.m. Eastern time tomorrow from the New York Stock Exchange. We'll then have live coverage in the overnight hours with more results, plus Asian and European

markets opening. And then Squawk Box will begin early. 5 a.m. Be sure to stay with. NBCNBC all night long, as Lyle Ritchie saying. It's running through my head. As we head to break, navigating the 2024 election. We'll take a look at the small-cap names that could be helped or heard by tomorrow's results.

Market Navigator explores that next. Hello, everybody. We were not talking football. Welcome back to Power Lunch, and let's get a quick check on the markets. The Dow is still down half a percentage point. The S&P is only down five points right now. The NASDAQ is hanging on to its. three-point gain, Dom Chu. What's in-market

navigator? Well, I'm certainly not going to navigate around NFL ownership issues right now. But all right, Kelly, so we've been talking a lot about how big and how important tech will fare depending on the outcome of tomorrow's election. But what about the small cap stocks overall? Our next guest says that small caps have had a tough go for the past couple of administrations, but that they could be ready to run to the upside,

regardless of who wins the White House. So joining us now is Gustav Ler, little, a senior portfolio manager at Allspring Global Investments and Gustav, this is an interesting thesis because, I mean, there's a mean reversion aspect. If you've been underperforming for so long, it's got to turn at some point. But what makes you think that now is the time, regardless of what happens with the election results this week? Yeah, that's absolutely right, Dom. You know, it's been a challenging period for small cap stocks. You know, historically speaking, small-cap stocks do a little bit better in a Republican administration. But as you said, it has been a

mixed bag. When you look through the last two administrations, it's been all about large-cap stocks, and small-caps stocks have really underperformed. You know, we're into the 14th year of this large-cap cycle, and we think the market dynamics in the fundamentals set up really well for small-cap stocks, regardless of who wins the election. Now, if that is the case, what types of small-caps would you be looking at and how would investors take advantage of it? Do they just buy certain value or growth-oriented ETFs in small caps, or do they look for specific names that might be in play? Well, a number of the, you know, scenarios that have been driving this valuation gap between large cap and small cap stocks has been the AI data center and also the flight to safety trend. So we've seen the valuation

spread among large cap and small cap stocks reach historically wide levels. So, we think there are a number of different ways to continue playing this data center and artificial intelligence theme down cap, but in much more attractive valuations. You know, one of those names that we think is really interesting here is called MIR Group. MYR Group is an electrical construction services provider, and they're really going to benefit from, you know, this transmission and distribution center theme regarding the aging grid. There's an expected 700 billion in spending for our transmission grid that they're going to benefit from, but also they have a commercial and industrial segment that should benefit from the growth in data center and AI.

So while you can play this name, smaller cap, it has a strong balance sheet, but it's trading for about 50% off the valuations of large cap stocks. So it's trading it about 20 times versus about 30 times for the large cap growth names that are also poised to benefit from the same theme. And Gustav, before we let you go, that's the AI theme. We've been talking a lot about it. Is it just all about AI or are there other plays besides artificial intelligence and tech? Yeah, it's not all AI and tech. We think there are a bunch of high-quality names down-cap that you can really focus on here. You know, as you go down in cap, there are a lot of non-profitable businesses.

But as you roll up your sleeves and look at other names, you can find high-quality businesses that are trading for discount evaluations. One of those names is in a beat-up consumer sector. It's called Car Gurus. You know, they aren't dependent solely on this tech trade and data center AI trade, but they're taking market share. It's not a very capital-intensive business, but it's also trading for low-pe-multipal with high-growth prospects in the small-cap space. All right. Gustav Little with the trades on MIR and Car-Gurus. Thank you very much. We'll see you soon, sir. Thank you.

All right. So with the elections list, looming. There's always this question, right? People want to talk about whether or not there's going to be some beneficial outcome for certain parts of the market. It's interesting to hear when portfolio managers say that, you know what, regardless, there are still opportunities, and they could flourish no matter who's in the White House. I remember, I have Tom Lee's words echoing in my brain about small caps taking off, and they just, that's why we asked Rich Bernstein about the top of the hour. It just keeps not quite taking the leadership that people argue it should. So I remain somewhat skeptical. All right. Be skeptical. Large caps have been the way.

All I'm saying is Sequin goes to the Eagles and suddenly he's amazing. Let's talk about what happens with the Jets. Tyler, over to you. All right. Let's check the economic dashboard. Investors and economists have been checking for the normal warning signs, employment, inflation rates. But a new warning light has been flashing, but it keeps getting ignored. Debt and deficits.

We will discuss that one next. Presidential election is less than 24 hours away. And as the candidates make their final case in key battleground states, our next guess says there's one thing they really aren't addressing. Our country's national debt, which currently exceeds $35 trillion. In a baron's op-ed, Sheila Baer claims the U.S. ballooning debt could drive the next financial crisis. Here now is Sheila Baer, former chair of the FDIC. Ms. Bear, welcome. Good to see you.

Thank you. Thanks for having me. Why do you think the debt is not getting any attention in this electoral cycle? My guess is that both of the candidates just want to, make taxpayers feel good and give them more? They do. There's been a lot of giveaways, both of the spending and the tax side. It's just both parties have decided that deficits don't matter anymore, which is pretty distressing because they do.

And at some point, we're going to reach that inflection point, and they're going to matter a lot to investors who are going to question whether they want to keep buying our debt. But, yeah, I think the calculus is now there's no political payoff for it. People don't want to hear that the taxes are going to go up their benefits are going to go down. And even if you go and make those hard decisions and institutes some reforms, the next, you know, generational leadership could come in and just squander at all.

So I think politicians have just decided it's not worth it. Before we talk a little more about the broader macroeconomic effects here, let me ask you about Social Security specifically. The trust fund either goes into outflow or deficit in a few years. It's not that far away. It's a dozen years, something like that. Why hasn't it been discussed to increase the amount of income that is subject to the Social Security tax? Wouldn't that go a long way to writing that particular program?

It would. It absolutely would. And actually, the payroll taxes now are pretty regressive. So looking at ways to make higher income people, higher wealth people, pay a bit more of that load. That could do a lot to share up the finance. But again, nobody wants to talk about that. Social Security in particular is the third rail. You know, I worked for Bob Dole in the 1980s in the Senate, and this is particularly upsetting to me because I remember in 1983, he and Ronald Reagan and Tipomile, a lot of people made some tough decisions to show up Social Security. They did the same thing with deficit reduction in tax reform and closing tax loopholes. These are hard decisions, but it shows leadership.

Back then, we had leaders who could do it, and I want to believe that we can have that kind of leader. again, but it's tough. You're not going to make anybody happy. Back then, you had Bill Bradley and Jack Kemp working to the same goal. I mean, I'm old enough to remember. It was. It was. It was very bipartisan. Yeah, and it has to be that way. You have to lock arms and do it because it's just one party, you know, you can't just have one party driving it. The other party will exploit those unpopular decisions. It has to be bipartisan and everybody has to be committed. And that's what happened in the 1980s. I'm hoping that's what can happen again.

We need for it to happen again. Sheila, I blame the bond market because it's not freaking out the way that it needs to. And if we remember in the early 1980s, I think the 10 year was it, what, 15% or something? So that's how you get bipartisan, you know, coming together and deciding to do something about it. And we can see glimmers of that when yield start to back up. And you feel like, okay, maybe they're starting to put pressure on the budget situation. But until we see a big sea change, it's almost as if the markets, saying they don't think we need to worry about it. They're giving the all clear almost for politicians

to just keep to keep going in this direction. No, it's absolutely true. We are, you know, you're seeing a lot of the gold reserve central banks are trying to buy more gold. Part of the reason that we can get away with this is Alan Simpson used to say we're the best looking horse in the glue factory. There's no alternative to the U.S. dollar. I don't think people are particularly confident in the way we're managing our finances, but there's no alternative. But now some central bankers Well, maybe we'll do gold. There's increasing talk about having a multipolar financial system where, you know, multiple currencies might be able to reduce the dollars reserve currency.

Technology could provide a way to conduct transactions without having to rely on the dollar in U.S. banks. So there are warning signs now. We shouldn't wait until it actually gets to be a problem. Now's the time to deal with it. But my gosh, we had a $1.8 trillion deficit in fiscal. called 2024. When the economy's running at about 3%, you start, you deal with this when the economy's strong because with the next cycle, there will be a downturn at some point. You're going to need to spend more again on safety net programs. It's the good times where you need to start whittling

that debt down, at least as a percentage of GDP, so you have some bandwidth to increase it when the economy runs into trouble. But we're not doing that. We just keep spending wildly every year now. And that's very short-sighted. And it's going to limit our policy options when the economy does run into trouble again. And the investors may not be there then. So remind me, straight in my numbers out, Ms. Bear, is debt greater than GDP right now? Debt, national debt? Oh, yes.

So gross national debt is it's about 123%. The publicly held debt is about 99%. It's almost over, but not quite. So what does the doomsday scenario look like? If the kind of ominous disaster you fear, and many, not just you, many people fear, happen, what would it look like? How would it play out? Well, you got a little bit of a taste of it with the Silicon Valley Bank failure a few years ago. You know, if investors start losing confidence in our debt, they may keep buying it,

but in much higher interest rates. So when interest rates go up, bond prices go down, even, especially, with government securities, longer dated government securities. So this is what happened with Silicon Valley Bank. They had all these lower yielding securities, huge market losses as interest rates rent up. You could have that same dynamic playing out on a massive scale if interest rates on our treasury debt spike because trillions are sold by banks, pension funds, insurance companies, households. Throughout the financial system, there are massive holdings of U.S. Treasury debt. If interest rates spike all that current debt is going to lose value and spike a significant financial crisis.

Right. But you saw it on a mini scale with Silicon Valley. That's what happened. That's, you've really drawn a picture for me that really clarifies it. In other words, if rates go up, because we've got to pay more to finance our operations, the value of those holdings, the capital in those institutions goes way down. Sheila Bear, thank you very much. Appreciate it.

Happy to be here. Thanks for having it. I joke we need a bigger market reaction, but I think our CDS spreads are trading wider than Germany. And, you know, there are signs that it's getting different. Let's get over to Bertha Coombs for a CNBC news update. Bertha? Hi, Kelly. The State Department says Secretary of State Anthony Blinken will speak to Israel officials later today

about the humanitarian situation in Gaza. Blinken and Defense Secretary Lloyd Austin gave Israel a 30-day ultimatum on October 13th, warning it needed to turn the situation around or risk losing U.S. U.S. military aid. Missouri sued the Justice Department today asking a judge to block the DOJ from sending lawyers to St. Louis on Election Day. They would monitor for compliance to federal voting laws. The city's election board has agreed to permit their presence.

The Republican-Land-State, however, said the 11th hour plan intends to displace state election authorities. And a tropical depression formed in the Caribbean near Grand Cayman today, and is expected to strengthen to hurricane strength by Wednesday. The storm is forecast to move into the Gulf of Mexico and could reach the U.S. The National Hurricane Center says it is already nearing tropical storm strength and is expected to bring tropical storm conditions to Jamaica tonight.

Kelly, yikes. Bertha, thank you for now. We appreciate it. Bertha Coombs. And be sure to join the CNBC delivering Alpha Investor Summit in New York City on November 13th. investors and business leaders will convene to provide insights, ideas, and analysis to help you deliver meaningful returns. Just scan that QR code or visit cnbc.com slash delivering alpha, and we'll be right back. Welcome back to Power Lunch.

Stocks have been mostly lower throughout the session, although the NASDAQ's been flitting into positive territory. It's just there by a hair right now. And bond yields have also been falling. And we have that Fed decision coming up. It's not just the election to kind of figure out. Let's get to Rick Santelli in Chicago for more on all of this. Hi, indeed. Maybe it is more than the election. Maybe it's still residual from what was the weakest job creation going back, what, almost four years? If we look at an intraday of three-year

and we had a three-year auction, we can clearly see several things. First of off, after the date of this morning, we made the low yield. And after the three-year note auction was completed, well, we made the high yield. And if you open that same three-year chart up to the end of July, you can see that basically yesterday's close was the highest close since the end of July. And if you pair up the two-year note on top of the tenure for a year-to-date, I want to draw your attention to the low yields of the year. When were they? They were mid-September.

What happened at mid-September? Of course, that's when the Fed cut interest rates, and they pretty much have been going up ever since. Now, if we look at where the yields were right before the jobs number on Friday, Two year was at 417, excuse me, it was at 420, it's currently at 417. Tens were at 4.30, right now, at 427 and a half. My point is, is after the weakest job creation in years, I was shocked that yields moved up afterward. So I can't tell you why there is a little bit of selling going on, but I can't tell you this,

that yields, for the most part, have been moving up, really, for a month and a half. Tyler, back to you. All right, Rick, thank you very much. Coming up, a regulator throwing a wrench into one data center's nuclear dreams will get the full story when power lunch returned. All right, several big tech companies reaching deals for nuclear energy to keep up with a massive demand AI will require. But today, Amazon's deal with Talon, is it Talon or Talon hitting a roadblock? Pippa Stevens joins us to explain that and give me the correct pronunciation. Yeah, so it is Talon Energy.

And basically what happened was the FERC, which is the Federal Energy, Regulatory Commission rejected this deal for a data center to be powered, an Amazon data center to be powered by Talon's Susquehanna Nuclear Power Plant. Now, under this deal, it's a little bit complicated, but under this deal, the data center would have been behind the meter and located right next to the nuclear power plant. And so it would not have to pay for transmission and distribution charges. And that's where opponents really came down, including some electric utilities in the region. They said it is unfair for the data center, which is using all of this power, to not pay the fair share of the distribution and transmission charges. Now, Talon has said that it's exploring options.

They also said that this ruling will have a chilling effect on the economic development of Pennsylvania, New Jersey, and Ohio. And we are seeing this big move in the stocks today, not only Talon, but also Vistra, Constellation and Public Service Enterprise Group, because all of them own nuclear assets in unregulated markets. and so they were seen as key beneficiaries. Now, it is important to note that no one seems to think this is a done, it is a dead deal. There's a lot of analysts coming out saying that you should actually buy the dip here, and they think that some sort of agreement will ultimately come to fruition. But the overarching issue here is how do we structure these deals

so that all the stakeholders are paying the appropriate amount? So the idea is that by basically co-locating the data center next to the power generating center, you get a sweet price on the power you buy because you're not paying any distribution. That's right. So it's behind the meter. And so the argument for people who are proponents of that say that you're not actually using all of that transmission and distribution infrastructure so you shouldn't have to pay. But then on the other side, people say that that unfairly shifts the cost burden and all of the needed grid upgrades to consumers to other parties. To other parties who are not so located. Exactly. And so the Constellation deal with Microsoft or Three Mile Island, that's different because

that's in front of the meter. There's not this one-to-one, you know, it's not completely powering just Microsoft. What do you mean in front and behind the meter? That's it feels like a term of art to me. I don't know what it means. Yeah, yeah. So it's just whether or not you're bypassing the meter. And so it's whether or not it's going through the transmission and distribution.

I see. So if you have like, you know, panels on your rooftop, that's behind the meter. It's generated on site. And so it's whether or not you're paying for that. But, yeah, so consolation and Microsoft is a little bit different. And so one option is that we could see Talon and Amazon instead sign a PPA or virtual PPA that's in front of the meter just like Constellation in Microsoft. I'm glad she understands.

Yeah, it's good. I want to be behind the meter somehow. It seems like. Anyhow, thanks, Bippa. Appreciate it. We discussed all the potential outcomes for tomorrow's election. Let's get some ways to trade them, no matter who wins. We do have some ideas.

Three Stock Lunch is next. And remember to catch our podcast. Be sure to listen and follow to Power Lunch wherever you go on any platform. And we'll be right back. Welcome back. And it's time for Three Stock Lunch before we go today. We do have some ways to play the election.

And our brave trader is Jay Woods, chief global strategist at Freedom Capital Markets because this is all that matters, kind of for the next 24, 36 hours. Yeah, it's crazy. Yeah, it's go time. We have a couple of different scenarios. The first one up is your trade.

Vice President Harris wins in which I don't want to say this is obvious, but there is one outlier stock that comes to mine. Yeah, I'm grabbing the third rail when I talk about this one. It's DJT. This is getting a little ridiculous. I mean, I'm a technician. I follow the charts, but the fundamentals do not match up. We are trading this like GameStop on steroids right now. And, you know, kudos to those that are trading it, making money. But over the long term, the metrics don't make any sense. The monthly active users have gone down. The advertising dollars have gone down. The two founders, big red flag, contestants from The Apprentice, they sold their 5.5% stake the second the window opened.

And then the biggest shareholder hasn't sold any, and another reason we rallied, but he owns 57% of the company in President Trump. So if he loses, you may see even a little rally people flocking to the site. But overall, how is this going to survive? from a fundamental point of view. You would almost, you say it would almost short it, but maybe that's a break. I would buy puts and it's going to be expensive, but it's something that you have to be on top of.

This is if Harris wins and Trump loses. What if the opposite happens and Trump wins? Is it a buy? Great question. Is it a buy? I think it is still a sell because. Because of the fundamentals. Until you see.

You have questions. Does he have to divest? Can he own this? Why does he still tweet? because he has 90 million users on Twitter and only 7 million followers on Truth Social. So I think Elon Musk will help him solve this problem, but what legal ramifications will there?

Will this be the mandated place we go to follow what the president has to say? So I don't think it's a good buy even if he wins. I guess Elon Musk could solve the problem for him. He solves a lot of problems. He can solve the problem for him very quickly. Yeah, he could. Just scoop it.

All righty. Next is your trade if Donald Trump wins you like financially. in that scenario. Love financials under this scenario. What does Trump do? He hates one thing, and that's regulation. And what have we seen in the last administration? A lot of regulatory hurdles. We're talking about deals that should have gone

through. The Spirit Airlines JetBlue, two failing airlines. The handbag merger. The handbag. How about I robot? Amazon can't take over this little vacuum. Was it the Roomba? And then Kroger and Albertsons, you know, the margins on these stocks are so thin. They

need to survive. And so there's been so much regulation, so many hurdles. I think that red tape is going to be cleared up with Trump. And then he has been a little vocal when it comes to rates. I know when Jay Powell, the person he appointed to the Fed Chief, was in, he was very critical when we started raising rates. So we'll see a low rate push under President Trump, which will bode well. And I think that regional banks are going to be the one beneficiary. They have not really come back all the way from that regional banking crisis we saw in March of two years ago.

10 seconds, we'll save for the perhaps the happy door, happy go lucky. You think what's benefits, no matter who wins the election? It's the cybersecurity. Cybersecurity is going to be the biggest thing going forward regardless of who wins this election. The best way to play is in a basket. CIBR is the best basket because as we've seen, crowd strike, they had a little hack and it hurt the stock. But the other benefactors were other cybersecurity stock. So safe way to play, cyber ETF. All right, Jay. Thanks very much. Thank you. And thank you for watching. Watching Powell lunch. Closing bell starts right now.