Power Lunch - Dow drops 250 points to kick off last trading week of 2024 12/30/24

Episode Date: December 30, 2024

Stocks moved lower today, in one of the last few trading sessions of 2024, potentially putting a sour ending on a banner year for investors. We’ll cover all of the angles for you. 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 alongside Catessa Brewer. I'm John Fort. And coming up, markets struggling into year end. Continuing Friday's declines, tech showing some signs of weakness for the first time in a while. We will discuss with Hayman Capital Management's Kyle Bass next. Plus an under the radar winner, small cap struggling over the past month. But this sports betting play is up on the month and up almost 60% for the year. And finally, we'll get to the latest on that deadly and tragic plane crash in South Korea. The country's acting president ordering an inspection of all 737,800 planes. First, let's begin with the volatility we've been seeing over the past few sessions. And Mike Santoli is here to lay out the market set up as we head into 2025.

It always feels a little bit like a letdown when you're heading to the new year on this note, Mike. Yeah, for sure, contest. And of course, it goes contrary to the historical patterns, which suggest general tailwinds going into the last several days of a trading year. What we did see this morning, though, interestingly, was a big flurry of selling in the pre-market and that carried over into the morning session. But we have found some traction. So the question here is whether the market's just a little bit unsettled after that waning momentum we saw going into the end of last week. Or if there's some larger message here, what I find interesting, John mentioned tech stocks actually came under some pressure for the first time in a while. Look at the NASDAQ 100 relative to the median S&P stock.

That's the equal-weighted S&P 500. So you see since the spring, you had the NASDAQ100 with massive outperformance, but the average stock was really making a comeback, trying to catch up to those mega-cap growth stocks, and that has succumbed. So the cyclical parts of this market have not been able to deal very easily with rising treasury yields at a time when economic momentum perhaps has stalled out just a little bit. I do find it interesting and maybe a slight hint that there was just a rebalancing trade out of equities and into fixed income, given that rise in yields. If you take a look at the performance so far this quarter of the S&P 500 against the bond market aggregate ETF, that's the ag right there. You see, that's a very wide performance spread. So if you are an asset allocator and you care about rebalancing among asset classes, you would naturally be a buyer of bonds and a net seller of equities to take profits. Not sure if that's the whole story, but that definitely was the backdrop heading into today.

All right. Mike, thanks. And now let's bring in a power player who famously predict. of the subprime mortgage crisis to see what he's looking for in the markets in 2025. Joining us now is Kyle Bass. He's founder and CIO of Hayman Capital Management. Kyle, good to see you. So broadly, looking at U.S. but global markets, what are the major themes that you expect to be most impactful in 25? Yeah, I mean, John, I look at the world a little bit differently and think about equity indices performance. But I think when you look at the financial architecture of the world,

the inflation that the U.S. just pushed to the world, from call it 2021 to 2023, you know, had a real negative effect on all of the global economies outside of ours. So we know how we're struggling here to make ends meet, given 40, 50 percent inflation across the U.S. board. In emerging markets, things are worse. And so when you see, again, the financial architecture of the emerging markets, I haven't seen it this bad since 98 and even, even earlier.

So I think that you want to focus on staying invested in the United States, in the United States tech arena specifically. And something that's really, I think, going to emerge as a theme over the next couple of years is you're going to see U.S. digital manufacturing. What Musk is doing with Tesla and SpaceX and the way that they are manufacturing a lot of these parts and very specific industrial items, I think you're going to see a resurgence in U.S. industrial manufacturing from the digital digital perspective, like things like that. So I'm very bullish on the U.S. and I'd be very wary to be spreading your capital across

the world today, given the ground war in Europe, the fight between Israel and Iran and a potential fight between China and Taiwan coming in the next. So given that, do tariffs protect U.S. acceptance? or do they make the whole global situation more tenuous? Yeah, I think this is a great, this is an important debate to have. We are no longer running a massive surplus like we did going into the Smoot-Hawley tariffs. We're no longer attached to the gold standard. And this isn't the U.S. pre-S. pre-S. Moot-Hawley.

We are a massive deficit-running, trade deficit-refinery country where we have the global store value and the hegematic currency, I actually think that tariffs now will act in a very different way than they acted in the past. And again, when you think about the rationale for tariffs, if you just think about the last time Trump engaged in tariffs specifically on steel and aluminum, and if you remember Biden ran on a platform of saying he'll immediately unwind those tariffs and he never did, the reason he didn't is because China specifically is a state actor and a state actor that is, let's just say, not one of our friends. And they can act uneconomically to put some of our industries out of business if that's what they decide to do. They can act in non-market terms.

So when they start dumping steel or aluminum, because they want to be the global, let's say, manufacture of steel and aluminum, and they want us to rely on them for those things, this has to be something that the new president, the coming in, must be thinking about tariffs from both in national security perspective and from a trade, global trade perspective. So I think you're going to see tariffs act more positively this time than they have in the past. Given your view of China and how outspoken you've been about TikTok, what do you make of President-elect Donald Trump's request to stay the decision to force TikTok to divest its U.S. operations? Yeah, I think the Supreme Court may decide this for him. I think, you know, we hear oral arguments

I guess they begin January 10th and the deadlines January 19th. I read the appellate court ruling and it was pretty unambiguous. It has nothing to do with free speech. It does everything to do with national security. And when you read that appellate court ruling, I can't imagine that the Supreme Court would flip that ruling. And I think that President Trump and his team this time got TikTok, let's just say, to play more fair in the election. And I think that is weighing on the thought processes of a discipline. How do you see that playing out in terms of, you know, a realistic rollout, given how many users there are here in the United States, how many small businesses make their profits on TikTok?

I mean, again, this is this, this is a false equivalency. The court ruling happened almost a year ago. And they told TikTok USA. So when you think about TikTok globally, they do about. 36 billion in revenue. TikTok USA does about 12 billion in revenue. TikTok USA, I hear their bids out there as high as 50 billion or more for it. So the U.S. court system has said, sell it to a U.S. company for the highest bid, or it's going to be turned off. So if your decision tree matrix was take 50 billion or more or take zero, the only tell in your decision is going to be if the Communist Party of China who controls bite dance, who controls TikTok, isn't willing to give up that algorithm that broadcast directly into 100 million or more households in the United States without the FCC's

regulation or without anyone overseeing it. I think the facts are what they are. And I think the decision tree matrix is 50 billion or zero. It's easy to make a decision that's value unlocking and continue this service for the people of the United States. So given that, China's playing a game of chicken here. Given that that's your expectation, and you have a pretty clear expectation of how the Supreme Court is going to decide, and you talked about U.S. tech, how does this affect the way you might invest in meta or Google or perhaps a Microsoft, which expressed some interest the first time around in buying U.S. TikTok?

Yeah, I mean, look, I don't think it's an either or. already exists today, John. So, you know, when you think about this 12 billion of revenue is already being had by TikTok, whoever the acquirer is, I think, could actually unlock it clearly the state of Texas, the U.S. government, U.S. military. There are plenty of people that are forbidden from using TikTok on any of their government devices because of its national security implications. So I think there's some, there are revenues to unlock here with a prospective buyer and also the leadership in our country deciding to protect U.S. national security. It all makes a lot of sense. It's China the one playing chicken with TikTok.

All right. Kyle Bass from Hayman Capital Management. Good to see you. Thank you. Well, one of Boeing's most popular plane models crash landing in South Korea over the weekend, killing nearly everyone on board. And one of that nation's worst air disasters in decades, we'll get an update on the investigation when Power Lunch returns. Welcome back. A deadly air crash in South Korea claiming the lives of 179 passengers. The country's acting president ordering an inspection of all Boeing 737-800 planes.

As a result, the stock is down about 2% today. However, there are currently no signs that Boeing is at fault. CNBC.com airline reporter, Leslie Joseph's here with more. Leslie, it seems like the issue here was on the ground, right? And the landing gear is one of the things they're looking at. Right. And it is very unusual. You see a plane come down at that speed, that close to the end of the runway. Without its landing gear down, the flaps were up. Kind of everything that went wrong, went wrong. That could go wrong, went wrong in this case. At the end of the runway was a concrete wall, and that's going to be a very big part of the investigation. As we're in the very early stages of

that the cause of the crash is not known, but that wall that the plane crashed into is going to be a big part of it. Talk a little bit about this model. I mean, Boeing has had a rough year with the plug that blew out of the other jet at the beginning of the year. But this model airplane is considered really safe. It is. That's exactly right, Contessa.

This is one of the most common aircraft models pretty much in the world. We're talking more than 4,400 in service just of this Boeing model itself. You know, Boeing has a lot of aircraft. This is not the 737 max, which was grounded about five years ago for those two crashes that we remember took 346 lives. This is essentially kind of like the Toyota Camry of aircraft. So then is it fairly common after a crash like this for the government to say, okay, we're going to investigate? And is our government also looking into this? So the way that the protocols work for crash investigations, the country in which the accident occurred is going to lead the investigation.

the National Transportation Safety Board from the United States, as well as Boeing as the manufacturer, and then the country that the plane was manufactured in and certified, the FAA will be playing a part in that investigation, but it will be led by South Korea. And they are investigating and taking a look at inspections for its 37, 800s. Pretty unusual for two plane-related tragedies,

very different in how they have unfolded to happen so close together. Very different tragedies. You know, we have this a different angle with the Azerbaijan crash that we saw very recently. The causes of the two seem to be extremely different. But this is a year, you know, we started out with a couple of miracles with the Jal crash and those passengers surviving. And then the door plug blowout, of course, on Alaska Air in the first days of 2024 and then ending on these two tragedies, unfortunately. And so what does this usually mean for an airline stock? Of course, the human lives are the most important thing.

But it could take quite a while for people to actually get to the bottom in this investigation of what all the causes were, right? It's true. It does take sometimes more than a year to get to the bottom of it. When you get that final report, when you get recommendations, they always say that airline safety rules are written in blood, unfortunately. And it does take a long time. We should in maybe a month or two get a preliminary report. We'll get a lot of facts coming out of that case. What were the conditions in the cockpit once those cockpit voice?

voice recorders do get digested. In the meantime, and not to put you in a tough spot here, but is there any kind of technology improvements to avert the bird strikes? Because we've seen this, I mean, for decades, really, that this has been a problem. It's part of what led to the miracle on the Hudson issue. Are there any advances on that front? Well, airports do put in some things. You think that Falcons are not high tech exactly.

You know, some smaller airports have put in dogs to chase birds away. And it does take sometimes a large bird in the case of Sully's plane and the Miracle on the Hudson. Those were geese, Canada geese, which are quite large. So we could get some debate, some discussion about, you know, when an aircraft gets certified, when an engine gets certified, what do we have to do about those bird ingestion tests and how it could affect other systems on the plane? That's really incredible. Leslie, thank you so much for joining us. and I know that you'll stay on top of the investigation as it unfolds.

My pleasure. All right. Well, let's take a look at another corner of the market that we have yet to talk about small caps, which have really been hit hard this month with the Russell 2000 down more than 8.5%. The index on pays for its worst month since September 2022. However, there are some under the radar winners in that group. Check out Sport Radar. It's a company that collects and analyzes sports data for its clients.

shares are up more than 58% this year alone. Joining us for an exclusive interview on what's behind his company's recent rally or the rally this year is the founder and CEO of SportRadar Carson Curl. Carson is great to see you today. First of all, so let me just explain for folks who may not know, sport radar has exclusive contracts with the NBA, Major League Baseball, NHL, FIFA to provide the data for those sports. to the sports books, to the teams themselves and the leagues. Do you rely on further expansion of gambling in order to grow your own company? Well, thanks for having me, first, Contessa. And from our perspective of expansion, that's fairly simple for us. We have all those contracts which you mentioned. These are our key partners. And it's not only the data, it's also the

audiovisual. Well, that's also data in the stream, which we can. enrich, which we can put into solutions, and we can set it. And we've reached that kind of tipping point that all those contracts are long-term, so most of them seven, eight years. UEFA is the shortest bond with the three years. But we have a portfolio here where we don't increase our costs much more, and that inflection point was visible in the last quarter, and that's what you see in the stock price.

So we show that margin leverage, because those contracts are long term, the content is secured, and we put it in our solution, and we have, well, all the connections to the market in the batting industry. We're seeing the valuations of sports climb and soar, but I know that sport radar walked away from the NFL contract as the data provider, leaving that to Genius, which, by the way, Genius shares, I know you don't like this, but they're up 40% year-to-date. Far outpacing some of your clients, if you look at Penn and Caesars and others, they're quite negative on the year. When you look at the value of, say, that NFL contract, how much is it

worth paying to have that? And at what point do you pull the plug and just wash your hands of it? It's a complex thing. So we have a sensational team working on the contracts where we're modeling how do we earn money over the long term. It's not a short game, as you know. So if we are looking now to the NBA, it's a seven years modeling. So we have exact information. How can we sell that? How can we put it into future solutions, which is a bit tricky to predict that for three, four,

five years ahead? And then we are coming to a number. And we are very strict in this. So we are very strict in how we're managing those contracts and how we do the bits. And if we believe there is value in for us, we do this. If not, we don't do that.

But everything should be in our target margin, which is a 25 to 30% EBITDA margin, with a cash conversion of 60%. So if such a deal fits into those numbers, we are going for it. If not, and others might see a value in there, we're happy that they're going on this. But for us, it's very important

that we are disciplined in the rights acquisition. Constan, how sophisticated is the depth of data at this point? I mean, right now, people are becoming more familiar with betting, you know, parlayes. You can pretty much guess about it. anything that's going to happen in a given game. But how deep is this? And to what extent have newer technologies around AI sort of allow people to use the data

that you have to predict, even at the micro level, what's going to happen minute by minute, second by second in a game? Well, speaking about technology, the data is increasing exponentially. And the skill here is we're going to have to process this in real time. and we're going to have to apply the algorithms or AI or next-gen AI, that we can get a meaning into this. To give you a bit, a glimpse of where it is at the moment for the NBA, we see the finger position when the ball is leaving the hand of the player. And we can look on the finger position. Might that be in or out?

And we can calculate probabilities on the way when the ball is going into the net. You see some solutions of this, how we visualize it. What about latency? because when you see that, the person sitting in the stand, the better, still has an advantage on their phone, opposed to the person sitting at home on their couch because of the latency in what the ball position is. That's the critical element. So what we see in the U.S. is we see a huge boom of in-play betting. So exactly that latency is really defining is a sportsbook winning or losing.

therefore such deals and such contracts are so important. We are sitting on the source of the data. We are not copying it. And it is very important that it is real time. Well, it's not exactly real time, as many of the technicians might understand. There is currently around about a delay of 0.6 to 0.7 milliseconds on this. But that is, I think, good enough to say it's close to real time. If you play is a bet, there is also processing time on the operator's sides.

So we are close to it. One more. There's been a lot of speculation that with an incoming administration change in Washington, D.C., that the environment for mergers and acquisitions is going to loosen up. In your space, Endeavor has just announced last month that they wanted to sell off OpenBet and IMG Arena for about half a billion dollars. And that has the contract with PGA for the data rights for PGA. Is something like that an asset? acquisition of that size interesting to you and something you would consider?

First and foremost, Contessa, we have a very strong organic growth. We have an engine, which is working rock solid, and which is well oiled. So we show margin leverage, which are our existing portfolio, and going forward, we have secured all the deals which we need to have. So it's pretty tough to see something, to buy something, which is matching the parameters which we have organically. But nevertheless, it's not surprising to us that some of the market companions are checking around what is possible for them. I think we reached a stage that we demonstrate leverage on scale. So we are looking to the market, very interested. But it's pretty tough that you match the profile, which we need to have to show that we have margin leverage.

Karsten Kohl, it's great of you to join us. We appreciate your time, the Sport Rader founder and CEO. Happy New Year. Thank you. Happy New Year. Still ahead. All In On AI. Microsoft pouring billions of dollars into improving its AI technology, but when will this invention pay off for shareholders? We will dive into that when Power Lunch returns.

Well, welcome back. Big Tech losing some of its footing into year-end. The gains this year were massive, but some are worried whether the trade will hold up. Take Microsoft. The company had tens of billions of cap-backs this year, specifically around AI, but when will that spending really pay off? Steve Kovac has the story. That's the big question.

Microsoft, by the way, those shares, like so many of the gains happen at the beginning of the year and just really struggling going into the end of the year here. But look, Microsoft is ending this year spending at least $53 billion in capital expenditures. That's not even counting for this current December quarter that we're in right now. Nearly all of that's going to be for artificial intelligence, Nvidia chips, data centers, and all that other related infrastructure. Microsoft has implied to expect around $20 billion in these capital expenditures each quarter going into 2025. That's at least $20 billion. The risk, of course, investors losing their patience

for a return on all this massive spending, CEOs Sat Nadela and CFO Amy Hood on recent earnings calls. They've said the AI demand is out there and Microsoft will keep spending to meet it. They can also dial back that spending if demand starts to slip. Over the last year, Microsoft has also announced at least 20 investments of a billion dollars or more at various locations around the world for data centers and also things like AI training and other programs. That includes locations like Spain, India, Indonesia, London, and so many more, including several states here in the United States.

Meantime, don't have a clear view of how well Microsoft's suite of AI products are selling. Some anecdotal data, but Microsoft has said it's on track to generate $10 billion worth of AI-related sales this year. A lot of that, of course, coming from the Azure Cloud business. As for the rest, they're co-pilot PCs. Those launched earlier this year, but without the marquee artificial intelligence feature called recall. Also, no clue how well co-pilot for businesses selling after more than a year. I've heard from a few CTOs.

2025 is going to be the year they assess if copilot is worth the enormous cost, and if they go all in or dial back their test versions. And then there's opening eye. Its losses are now bleeding over to Microsoft, which is, of course, its biggest benefactor. Microsoft said it expects open AI's losses to shave a couple cents off its EPS in the December quarter, about $1.5 billion, guys. So a lot of costs still unclear when it's going to pay off. And in the meantime, spending like crazy. But important to put into context, AI investment isn't just for what we think of as AI today, right? Mark Zuckerberg famously a couple years ago was buying

all of this, you know, AI infrastructure, not sure what it was for. And it. it turned out to be hugely beneficial once they figured out how to make Reels work and how to... Microsoft has all of this homegrown software that needs AI, so it's not just hoping other people buy it, they need it. And it's not just AI, it's Open AIs AI that they're using as well. And you know this, John, but going back to Sottian Della's early tenure as Microsoft's CEO, he made huge investments for today's cloud business early on in his tenure. And so, you know, you can make the comparison to what he's doing.

now, yes, it's a lot of spending. It's unclear when that spending is going to slow down or stop or where they're going to meet the demand. But Nadella was very good that first round predicting how the cloud business would play out. That bet paid off enormously. And so the bet here again is that he knows what he's doing. All this investment's going somewhere. It's just not exactly clear when and how and how long it's going to take. All right. Well, thanks for joining us, Steve. All right, let's take a look at the insurance space now. And reinsurance renewals are due January 1st, you know, guys, reinsurance is insurance for insurers. Ahead of mega catastrophes, they buy policies that help insure them.

Guy Carpenter is out with a report saying that reinsurance rates have declined 5 to 15% depending on the region and what level that the policy kicks in. It's not because the risk is any lower, but rather that the premiums have been skyrocketing over the last couple of years. Well, that makes for attractive profit potential. More companies got into or expanded their. reinsurance offerings. And that competition lowers prices for the customers. Take a look at the returns here. Reinsurance Group of America is 9% above its 52-week high, up 31% this year. Renaissance

Re, up 27%. Aeon kind of falls into that category of reinsurance, but also a brokerage and consulting. And the brokers make money selling all those higher price policies. You have Willis Towers Watson, Arthur J. Gallagher, W. R. Berkeley and Marsh McLennon, which are all All up double digits. Look at that. Willis Towers, Watson, 30% this year. The big name insurers, Progressive, up 50%, all state up 37%. Chubb, Travelers, Hartford.

Progressive, by the way, 50%. They had a rough year with auto insurance, but they've really turned that around. And if you've opened your property insurance bill this year, maybe your jaw dropped. You're not alone. Property and casualty insurers are finally catching up to inflation-fueled loss costs. On the other hand, if you had an, now I'm like John Ford, right? On the other hand, if you had invested in the much smaller insurer tech type companies, look at Lemonade, up 140% hippo, 200% root, 600% root was really struggling with auto insurance.

Sold off a bunch of real estate, laid off a bunch of people. But boy, those shares have turned around, and those investors probably like that, even if they don't like what they're paying for their own policy. Well, yeah, if you're an investor, I guess you're happy for them. Yeah. Wow. All right. Well, we continue to monitor the volatility in stocks today. The Dow is on track to post its worst month since September 2022. We're going to dig further into the markets when we return. Welcome back to Power Lunch. I'm Morgan Brennan with your CNBC News Update. President Biden ordered all executive departments and federal agencies to be closed on January 9th as the nation honors the life of Jimmy Carter. Markets will also be closed for his state funeral. President Biden is expected to deliver a eulogy for the 39th president who died Sunday at the age of 100. A name, image, and likeness legal fight is heating up at Florida State.

Six former FSU basketball players claim the former head coach, Leonard Hamilton, failed to deliver promised NIL payments to them of $250,000 apiece. The lawsuit claims they even organized a team-wide practice boycott over the issue. And New York City is making sure it's iconic New York. year's Eve ball is ready for its starring role later this week. Organizers practice raising and lowering the ball today before sending it up to the top of its 139 foot flagpole in Times Square. The ball is nearly 12,000 pounds. It's comprised of 2,700 Waterford crystals and can apparently display more than 16 million colors. I didn't even know there are that many colors, Contessa,

but to me, the number that really stands out, one ton of confetti is going to drop. Yeah. at midnight. And they go out there the next day and they clean it all up. But insiders tip, I mean, like, you know, I'm a New Yorker 20 years now. The tip is it is much better on television than out in Times Square because standing in a pen is not fun for like it's 12 hours. You get locked in there for 12 hours. No drinks, no sitting, no blankets. You're just there. Yeah, you do it once and then you never want to do it again. You're good. It's off the bucket list. That's right. Morgan, thanks. Stocks in the red, but off the lows of the day. Friday's decline, of course. This is just a continuation. The Dow's sharply lower for the month.

As you can see, it's off by more than half a percent. This year's explosion in valuations may give some investors pause, especially in regards to big tech. Is there more room to run? Our next guest still sees opportunity from here. Let's bring in Dory Wiley, president and CEO of Commerce Street Holdings. Dory, great to see you. Do you see opportunity right now because we're seeing a bit of a sell off here at the end of December? I do. I think there's opportunity across the board. I'm a little disappointed that NVIDIA's not down more because I wanted to buy something. Where do you see opportunity in what specific areas of tech? Well, I think in all areas of tech. I mean, first of all, we've got a market sell-off here towards year-in for whatever reason. It could be profit-taking,

early rebalancing, the end of the Trump bump, euphoria, fear of cutting rates, et cetera. But then I think you look at some of these sectors and try to see where they've been going up. You brought up insurance earlier. I think community banks still look really good. I know quite a few community banks still trading below 12 PE. And then a market where everyone's crying overvaluation, that screams under valuation, especially when you have banks that are growing, have stable deposits and are looking for an easement of regulation so they can do more M&A going forward. There is some concern watching the bond yields here and an indication that maybe the Fed is not going to keep continuing on its path of cutting. Maybe this is where we're going to stay for a bit.

What's your view on whether that should affect the equities investment? Well, absolutely here. And we're getting messages from all the wirehouses. You know, Goldman comes out, still says we're going to get three rate cuts. And the Fed comes out and says, look, we changed our dot plot to 50-bats. to a 50 basis point cut next year. So I don't know if they're paying attention or not, or maybe they just don't believe the Fed knows what they're doing,

but the Fed's got a track record over the last year or so of being right and the market wrong on what they're going to do. Having said that, the market's sending a little bit different message because if you look at that tenure, it's up 60 basis points since they've last cut 100 basis points. So the market's saying that the rates ought to be going up, not down. So, Dory, is 2025 another year where the equal weight S&P 500 underperforms? Yes, it is.

So if you look back, we've got the Mag 7 still dominating the market. And look at the year, right? We have an election year. We have a couple of assassination attempts. We've got all kinds of geopolitical scares going on out there. And we have 20% less volatility in the S&P than this long run average. And I would contend, even with the increase of Max 7 in that percentage weight, it's because of Max 7. And why is that?

Because Max 7 makes a lot of money. It has heavy gross profit margin. It has heavy returns on equity. It's way different than the dot-com era, and it's actually providing stability, not instability. But people are afraid of it because it just had such a big run-up. But when you look at it, it's very, very real. All right, Dory Wiley. Thanks. Nice of you to join us.

Well, Treasury yield slightly lower as the last trading week of 2024 starts on a sour note. We're going to go to Rick Santelli for the read on the bond market when Power Lunch returns. Welcome back to Power Lunch. Let's check in on the bond market. Rick Santelli is tracking the action, Rick. Hi, John. And, Dee, you know, we had Chicago PMI this morning at 945. If you look at the last 28 months, the last 28 months, we've only had one reading above 50.

That was Nova of last year. And not only was today's reading week and under 50, it was under 40. Week as since CEP of this year. Now, consider this. Normally, when we see very weak data, we see a differentiation on the coupon curve from the shortest coupon of two year to the longest 30 year. But as you look at the charts, there's virtually no difference. We're significantly lower in yield, higher in price all along the curves. As a matter of fact, if you look at the 2s 10 spread, it's hardly moved from last Friday,

hovering right at 30 basis points, virtually the steepest going all the way back to mid-2020. Now, technically, many traders always are looking for clues as to when they could lean against these higher rates and longer maturities. Well, the 30-year bond delivered. If you look at a chart year-to-date of 30-year bond yields, what you should notice is that Friday's close was a whisker under 482. If you look at the end of April, we also had another yield close right under 4.82%. That double top is something traders are talking about. Now, it doesn't mean that it is the top, but many traders will view that as a top. Now, I know pretty much 2024 is over, but this is significant that we've done.

If hit that level in reverse, that same level in a 10 year is a bit higher at a yield of 4.7%. But we want to monitor that on a closing basis. Contessa, back to you. Rick Centelli, thank you, sir. Coming up, a special year-end edition of three-stock lunch. We trade a few names to leave behind in 2024 and one you're just going to love in the new year. We're back in two. Welcome back time for today's three-stock lunch and we're taking a look at some of the worst S&P laggards this year, which names should you dump and are any due for a comeback? Here with her trades, Victoria Green. She's the chief investment officer of J-squared private wealth management, a CNBC contributor.

Great to see you. Victoria, first up, we have Walgreens, and boy, this has been a rocky year for the retail pharmacy unit, particularly. The shares down 64%. What do you think of Walgreens? Man, I think they can't end this year, close and fast enough. And for me, leave behind 2024. Just because the stock is trading at $9 down from 50 doesn't mean it can't. move from 9 to 7. They have so many structural problems. I know they got a little bit of a bump potential buyout from Sycamore, but that's a difficult buyout. Sycamore Partners isn't that large to buy an entire company like Walgreens with their $33 billion of debt. There's also multiple bond covenants that make this difficult. There's a change of control put. So there's a lot

of structural problems there. And as you pointed out, retail U.S. pharmaceuticals, that's about 80% of their revenue. And it has been stuck and stagnant. And they keep losing market share to things like CVS, to express scripts. to Optimum RX. And so you say, okay, great, what does Walgreens do? They likely are going to have to break up or they're going to have a take private, but it's going to be very complicated. For me, leave it behind. Don't touch it in 25. Just because it's in the nine, doesn't mean it can't go lower. Okay. Well, speaking of problems, Intel, down 60% this year as the company grapples with how it should position itself in the AI battle. It's also searching for a new CEO. Victoria,

what do you think? For me, again, it's leave behind in 24. I think they're having a bottoming process, I just don't think it's going to happen in 2025. First, I do have to find a new CEO, and they have these two current co-CEOs, which are at the same time trying to kickstart this business. But one of their problems is just their servers, their business there is so far behind Navidia and AMD that for me, they're having to base themselves only on the PC market and AIPCs have been slow, and that PC market just hasn't bottomed out. I'm just not sure. We're going to see the catalyst come around in 25. It might be turning a battleship, but for me, I'm going to leave here because I think they still have a lot of structural decisions, how to get this company back to

growth. And I know it's been a lost two decades. I think we could wait it out a year or two more. The final trade here, dollar tree down 47 percent this year. It's really struggled with the battle for bargain shoppers. The company announced it will consider selling off its family dollar chain. But at this price, is it a bargain worth taking? Victoria? Yes. Now, I'm going to point out, these are all trying to catch a following knife here, but I love this one, and I'm going to quote one of my favorite silly movies, dumb and dumber, so you're telling me there's a chance. But look at what they're doing.

They've already made some of their decisions. They're said, family dollar, your lower margin are not doing great. We're going to spin you off. We're closing up to 600 stores. We're focusing on Dollar Tree. And look what they're doing with their tier pricing. It's no longer dollar. It's $1.50 to $7, but that's offering a wider variety of products.

So they're able to compete with the Walmots of the World and get a little bit more on retail. And they've seen some decent foot traffic, even if transaction size will, little lower. They're seeing those consumer staples continue to be bought. So for me, I think this turnaround story's already past that first lap. You actually are seeing a little bit of a bottoming relative relative to the consumer staples. There's a little bit of a U-shaped trend there on a relative basis to the rest of the staples. So I see that gets as positive. And if you're going to go bottom feeding, for me, Dollar Tree is the one I take into 2025. Well, listen, I just love any guests who can deliver a very pithy movie line. Victoria Green. Thank you for that. Happy New Year.

Happy New Year. Well, still ahead, the rise of social media shopping and influencers leading to the growth of knockoff brands and so-called doaps this holiday season. We'll get the full story. And remember, you can always listen to our podcast. Be sure to follow and listen to the Power Lunch podcast wherever you go. We'll be right back. Welcome back. Bootleg retail items have always existed in the past.

You either fork up for a luxury purse or hit up Canal Street. But now social media might be increasing the popularity and access to doaps. Courtney Reagan is here with that story. Court? Hi, John. So today's doaps aren't counterfeit insofar as the branding. And sure, fashion and premium brands have long dealt with lower priced copycat goods. But social media has kind of accelerated what's called dupe culture.

So Sprinkler AI ran a query for CNBC with more than 2.9 million mentions in 2024 from public posts on social media sites, along with YouTube blogs and other sort of shopping sites for the word dupe. So Chanel was the top brand associated with dupe at more than 19,000 mentions followed by Dior and then Apple. Lulu Lemon also had a high number of mentions associated with users looking for dupes. Now, imitation may be the highest form of flattery, but in this case, it means potentially losing the sale to someone else. And while no one copycat brand dominated for Chanel, Dior, or Apple Dupes, Sprinkler AI, found that for 20, of the most common Lulu Lemon dupe requests, the social community suggested similar options at Walmart on eight of those 20 products, Amazon for five of the 20, and Sheehan for two. Here's an example

of a Walmart dupe for the Lulu Lemon Everywhere belt bag. So it doesn't say Lulu Lemon on it, but it does look strikingly similar. Now, for free people dupes, Amazon was the answer for 14 of the top 20 products requested. It is important to note that 94% of these mentions that were aggregated for us. We're not from influencers pushing goods for a commission or a fee, but rather consumers more or less crowdsourcing a look for less. Where can I find this Lulu Lemon dupe somewhere else? Back over to you guys. Well, I think that's super interesting, but also, you know, I just went into Walmart and I was surprised to see name brand goods that I have never seen in Walmart before. Now you can just go to Walmart if you want to get

a name brand thing and pay the lower price but right from the store. And most necessarily also from Walmart.com, Contessa, because they're really expanding their marketplace, both with sellers that sort of post on their own, but also with these sort of partnership agreements. I don't know if you remember C Wonder, that was founded by Tori Birch's husband, but it sort of disappeared and then Walmart sort of owns the licensing rights to that so you can find a lot of those products on their website. So the internet also offers us an endless aisle and online.

social media gives us a very quick access just through a click. When someone finds something pretty cool, look for less, it's easy to pass it along. Well, and those fast fashion outlets are just so quick to copy whatever is hot and get it moving. Court, thanks. Thank you. What brand were you surprised to see? You remember? There was Reebok. There was Chaps. There was polo. And I thought, oh, normally that's outlet shopping. Chaps at Walmart. Who knew? All right. Thanks for watching, PowerLone. Closing bell starts right now.