Power Lunch - Dow drops 300 points as Iran-Israel conflict worsens 6/17/25

Episode Date: June 17, 2025

Stocks are lower as investors pore through the latest developments in the Middle East, with the Israel-Iran conflict raging on for a fifth day. 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.

Stocks and your money lower ahead of the Fed as the world watches Iran. Welcome to Power Lunch, everybody. Your money dominated by a number of headlines right now. First up, President Trump bailing on a meeting of world leaders in Canada. It's as the world watches and may be ready for potential military action on Iran. All of that as the Federal Reserve kicks off a two-day meeting with an interest rate decision on deck Kelly. Let's begin with the latest developments in the Israel-Iran conflict. The president weighing in, posting on truth social, and calling.

for nothing less than Iran's unconditional surrender. And stocks are at session lows right now. That's a bold statement that underscores just how high the geopolitical stakes have become. Not just for the region. We're talking about global diplomacy and security here. And that's where we begin today. Yeah, President Trump's latest comments. Megan Casella is in Canada where the G7 has become the G6.

Megan. Brian, that's right. meetings and programming have been continuing here today, but all of the focus has been on the ongoing conflict in the Middle East after the president's abrupt and surprised departure late last night. All of those discussions ratcheting up even more after the president just in the last hour or two, posting on social media escalating his commentary against the Iranians. And as you said, calling for unconditional surrender. In the first post, the president saying we know exactly where the so-called supreme leader is hiding, calling him an easy target,

but saying we are not going to take him out, at least not for now. Our patience is wearing thin. In a separate post, the president also said we now have complete and total control of the skies over Iran. Guys, in both of those posts, note the use of the word we, really aligning the U.S. alongside Israel there closer than ever, raising even further questions about just how far the U.S. is willing to go to help Israel in these attacks and raising questions about what the next step is going to be from the White House in this ongoing conflict, all of this now playing out in public really in a truly remarkable way in a way we don't typically see for American foreign policy. But guys, there is also news still coming out of

this G7, including one piece, Brian, that I thought would be of interest to you specifically. Earlier today, we heard from the EU Commission President that's Ursula Vandrelay in. And she said that now that oil prices are higher, that there's little pressure to lower that price cap on Russian oil. So that's one piece of the discussion that we thought we were going to be covering most of today. There's obviously a lot else going on, but it is something that impacts all of these discussions and all of the meetings that continue to take place. Guys, well, thank you for that. So to be clear, it appears that whatever news that was supposed to be around President Trump, the news now, the headline is that there is no President Trump. I think him leaving is the news,

correct? That's absolutely right. That is by far the biggest story to come out of this G7. And when the president was asked about leaving early, he said he had to be in Washington to focus on this conflict. It was easier to be there rather than focus, rather than have to rely on phone calls, I should say. And he also noted he felt like he had done what he had to do at the G7. I can say we confirmed that he did meet one-on-one with nearly every member of the G7 as well as the leaders of the European Union when he was here yesterday. The only question mark in that group is whether he met one-on-one with Italy's Georgia Maloney. Everyone else he did have a side-by-side meeting with. So even though we...

We didn't see a lot of the news we thought we could see this week on Russian sanctions, on trade deals specifically. He says he did what he had to do. Now the Middle Eastern conflict is what's taking all of his attention. For sure. Megan, thanks for now. We appreciate it. Megan Kassella. Let's talk more about that Middle East conflict and the impact of the president leaving the G7. Fred Kemp is president and CEO of the Atlantic Council and a CNBC contributor.

Joining us from the Atlantic Council's Global Energy Forum, matter of fact, in Washington, D.C. And Fred, what's the buzz? what's the latest, especially amid the president's really sharp messaging on Iran just within the past hour or two? Well, let's start with the G7. It says nothing good about the organization that the president leaves early at a time of geopolitical crisis. The G7 was created as a place where Western advanced industrial countries, democracies, talk to each other about just this kind of problem. And so maybe that's the reason he left was he's a little frustrated with the group. That's also not a good sign if he's frustrated with a group that has always been a vehicle for the U.S. to do things. As for Iran, I think the White House is signaling pretty clearly to the Supreme Leader of Iran that you've got two choices.

You can reach a deal that would put you in a position that you're really going to give up any hope of getting toward a nuclear weapon in the future. and that deal is on the table. Or we can do it the easy way or the hard way. You'll continue to be hit by Israel in a military sense. And potentially by the United States. Let's remember that Fordo is what we're watching. This is the deep nuclear installation in a mountain. It was secret for many years.

Only U.S. weapons can take that out, B2 bombers with 30,000 pound bomb. The Israelis can't really get to it. And we understand that's under some consideration. So the president is really seeing this moment is a time of key leverage on Iran. Their defenses are down. Their proxies are down. They're unable to strike Israel in any successful way because Israel's defenses are up and working. And so this looks like a historic moment.

You hate to put it this way, but sort of a do-or-die moment for Iran, where they really have to come to the negotiating table and reach negotiation quicker, see things get even worse for themselves. What is your position, Fred, or the Atlantic Council's position on how close Iran is to having a nuclear weapon? Well, what experts tell me is they're days away from having, putting, being able to assemble the fissile material that they would need to put

together in a bomb. It then takes somewhat longer to turn it into a deliverable weapon with a system that can actually deliver it. So I think U.S. officials would say to actually deliver a weapon, it's more months away. The difference between the U.S. and Israel is Israel sees this as an existential question. If you can get Iran away from a weapon now and for as long as you can into the future, that means the survival of the Israeli state. For the U.S. it's not existential, but the U.S. has also said that they will never allow Iran to have a weapon. So even though we're looking at it from a different perspective than

the Israelis, it sounds to me, as your reporter said, using the word we, that Israel and the U.S. are joined at the hip right now vis-a-vis Iran. You know, how much of this, Fred, do you think, is the national security threat around Iran? And how much of Trump leaving the G7 up there in the mountains of Western Canada is kind of a power play, a little bit of a flex where you're saying to your trading partners, Dorinda Modi, Claudia Scheinbaum of Mexico, all traveling there literally to meet him. They can say what they want, but it's to meet Trump. Him leaving is a power play,

and I wonder how much of that is just the power aspect of it and not the urgency of the moment. Well, Brian, you seem to know our president of the United States very well. I think it's a bit of both. So trade is a tomorrow issue right now for President Trump. It's a today issue for those that traveled to meet him. Modi from India, Shinebound from Mexico, Isheba from Japan. They all need to strike trade deals with the U.S.

We're hearing that they may now come to Washington. The president feels he has until July 9th, which is the end of the pause. So that's all the time in the world for the president when he's got the Iran situation as a much, much more urgent matter right now. So, yes, it's a power play on the one hand. I don't think he likes those kind of group meetings in any case. And he's putting his priority on Iran, and it's an urgent one for him. Yeah, how does this play out?

Where does this go in a week, a month, a year, Fred? Well, I think I like your sentence. How does this play out? Because it is going to play out. It has to. This is not like too much. The current state is not sustainable. There's a window to take care.

of what Iran's been doing. And there are four options, and I'm going to go through them really quickly. The one is they actually get their nuclear capability taken away from them, through the power of a bombing campaign, and maybe even regime fall. The second is they reach a deal that takes away their nuclear capabilities, and those are the two relatively good options if you're looking at this agile political. The less good options are they've survived, they hang on to their bomb, they're even angrier at Israel, and we kind of back away from all of this.

I don't think that's on the table right now. That's why I don't think things will be the same in a month or even in two weeks. I think this is a now moment. And of course, a very bad situation is absolute chaos on the streets of Iran and also the nuclear – The nuclear option in place. I'm going to ask you to speculate, obviously. Iraq, Iran is kind of out there on its own.

The Saudis, you know, they deal with them with OPEC, and Iran is the rotating member of president of OPEC this year. But the Iranians have always kind of looked to Russia for help. Russia's fully engaged with its war in Ukraine, its weekend. Is this the time of regime change in Tehran? The Iranian people are not to blame here. Just like China, it's their leaders. It's not them.

Is there any chance at all, the Ayatollahs are deposed, and the Iranians sort of take back their country for lack of a better term? I think everything's on the table right now, Brian, and I think that is as well. I have a very close contact who's close to the Trump administration, and he's been in Iran in the past month. He knows Russia as well in Soviet Union, former Soviet Union. He told me there's a perestroika feeling on the streets, and for those who don't, know the perestroika period, that was a period of political reform in the Soviet Union. Economic reform was Glasnos. All the repressive institutions were in place, but people had lost their fear, and those in charge of the repressive institutions weren't willing to crack down

any longer. And he said that was the feeling on the streets. And that's the kind of feeling that came ahead of the Soviet regime collapse. But at the time, nobody was talking about Soviet collapse. So we are talking about that. Then does a monarchy follow it? Does a military state follow up? Does chaos follow it? I think these things are all on the table right now,

and the region is very interested in those outcomes. The region wants building on the Abraham Accords a group of moderate, politically moderate, religiously tolerant, economic modernizing states. like Saudi Arabia, like the UAE, like Oman, like Qatar, and that you bring the rest of the Middle East into this kind of modernizing, moderate, and that's the big opportunity that presents itself

because what stood in the way of that? It was Iran. And if Iran doesn't stand in the way of that any longer, you have a huge opportunity in the Middle East for quite a different, quite a different alignment in the future. Yeah. Well, hopefully we'll be speaking with the Iranians at OPEC in a couple of weeks.

We're going to find out. Fred Kemp, thank you. It's a great point. History in motion. Are you going to that meeting? We hope. I would hope to, yeah. I mean, depending on what even happens with that meeting at this point.

And as you said, Iran has the leadership. It's a similar, it's like a conference. There's like a meeting around it, but there's also like CEOs that are going to be there. Yeah. But the fact that Iran has the rotating presidency is fascinating. Yes, and the question about what they'll do now with this looming is one to ponder. Diplomacy maybe through oil. oil. We'll find out. All right. Let's get now more on oil and energy because it's another

layer to this growing story. We've talked about the importance of the Persian Gulf and the narrow straight of Hormuz. Right now, oil and ships still flowing, but if something were to close it or impact ship traffic and oil and gas imports, you certainly could see a big spike in those prices. Remember, about 20% of the world's oil total flows through the region. So if shipping through there were to get disrupted, it becomes a global. problem, and we just had a scary situation happen on the water. Overnight, two ships collided and caught fire. The old crude oil tanker Ada Lynn and another ship, the front eagle, smashed into each other

in the Gulf. The Adelin caught fire and burned. All the crew escaped safely, thank goodness, but there are many questions here. And as Freight Wave notes, the Adelaun had no registered insurance, meaning it could be one of the so-called ghost fleet that we've been telling you about for. for a couple of years now. Let's talk about all of this joining us. Clay Siegel, he is Senior Fellow for Energy Security at the Center for Strategic and International Studies,

also an analyst with extensive ship and tanker expertise as well. Listen, they jammed up. Apparently, Clay, you tell me, if I'm wrong, some of the signals on these ships, which pretty much operate like airplanes at this point, meaning its kind of computers running the show, two ships colliding. It's happened before. It will happen again. But the timing is hard to miss at this point.

Hi, Brian and Kelly, it's good to be with you. You know, the timing is really auspicious because naturally people are concerned about ratcheting up tensions between Iran and Israel and potentially with the United States and even other players in the Persian Gulf area. And to your point, right, 85 oil tankers, something like 20 million barrels a day of oil, if you count crude and products, moving through the straight of Form moves, getting that oil to market. And it's all quite vulnerable. And apparently what happened yesterday with the collision was not a direct result of the fighting. It was related to a navigational error.

But it's a heck of a coincidence that a lot of operators in that region were reporting what looked like jamming of navigation GPS signals at the very time that these tensions are ratcheting up, that people are worried about a rising risk profile for oil and gas shipping. of the region. So on a good day, we already have navigational problems. Oh, and then there's the added issue of one of them was apparently part of the shadow tanker fleet, which is being used around the world to try to evade sanctions. Those don't have the same spec as tankers in the legit market. So they're older. They're more prone to oil spills. If there's a collision, they're often crewed by less competent personnel. So we need to worry about the cost. confluence of these risk factors coming together in this very hot spot for global energy supplies.

And maybe we can show the intraday of WTI crude, which is up 4% right now, Clay. Obviously, people are a little bit nervous about what may be taking place with Iran at the moment. So can you talk a little bit down the road about this? I mean, what are some of the scenarios based on what the U.S. chooses to do or not do here, bring it all back home to the price of oil and gasoline? Sure. Well, traders are always evaluating the risk of a supply disruption in terms of how much volume could be taken off and how long it's liable to last.

But I've spent most of my career looking at the probability of energy supply disruptions, and I have to tell you, if you told me Iran would be in what looks to lay eyes like a full-scale war, and we'd only be up to the mid-70s in terms of benchmark oil prices, at face value, I would be surprised. But, you know, if you peel back the onions, it kind of makes sense. You guys are used to the market psychology of FOMO, but the prevailing sentiment in the oil market is, oh, no, the oil halt never occurs. And I'm not sure that the traders are completely wrong with that sentiment.

You've had years of mini-upheaval with no material supply disruption, maybe a little bit in Libya from time to time, but not really in the Gulf. demand is really slowing down around the world. We have a new indication from the International Energy Agency about that pattern today. Saudi Arabia and Iran, before this at least, getting along much better than in future years. And in the most recent anecdote where we had a blow up, which was in 2022, when Russia launched its full invasion of Ukraine, as you know, we skyrocketed up to triple-digit prices, $5 a gallon gasoline on the fear that Russian oil would be coming off the market turned out, relatively speaking, at least volumetricly, there's plenty.

I think what you're saying is there's plenty of oil in the world. And if this ends peacefully, we all pray that it does, that maybe we'll see $45 or $50 oil because we won't have that geopolitical risk. If the risk premium has only taken us to 75 or whatever it is, Clay, not much of a risk premium. But how about this? You know, Iran is a wounded animal. Okay.

And that means it's dangerous. It means it's dangerous. And if we have one mine laid in the Strait of Hormuz, one cruddy missile attack on some tanker, right? One of these tankers involved, by the way, was called the Front Eagle. It's based in Cyprus, but the company trades here in the United States. Company called Frontline FRO is the ticker. No indication of any wrongdoing whatsoever. I want to make that very clear.

But I don't want to say American flag. There are none, but kind of an American-ish vessel. If we have one mine laid, one ship sunk, what happens to the price of oil then? Well, prices are going to move higher in that scenario, mainly because the cost of shipping is going to go up. Insurance, risk management, and even some players probably choosing to avoid the area, at least until things calm down, which, of course, is now the established multi-year pattern in the nearby Red Sea. And that has already affected oil and gas prices over the last few years. The thing to watch is the level of any supply disruption volumetrically, and again, on duration.

If it's just Iran's oil going offline, it's about a million and a half barrels per day. OPEC spare capacity north of three million barrels per day can cover it. There's some question about whether Saudi and UAE would immediately jump in to provide that coverage. That could be politically dicey. But if you get into an extreme scenario where major flows, I'm talking about flows from Saudi Arabia, UAE, Kauai and others are potentially throttled or cut off, there is no spare capacity that can be brought to bear to offset that kind of disruption. And the next ceiling for prices after that would be demand curtailment.

Yeah. Well, that's it. Watching those ships is hedge funds, they're watching live satellite feeds of not only how many ships were in the Persian Gulf, but the weight of those ships, in other words, how much oil is on them. If that changes, oil prices change. Clay Siegel of CSIS. Thank you very much. We'll move on. Thanks. And again, crude is now at 4% on the session. So we are at session highs, just as stocks have recently and are now pretty much at session lows. Not extreme moves, but clearly a positioning here of much more caution.

Coming up, everything you've just heard ties back to the major question of whether the U.S. is becoming more directly involved in the Middle East conflict. And the answer could depend on that secret mountain bunker in Iran. We are just talking to Fred about. details right after this. Or whether or not the U.S. becomes directly involved, directly involved in the Israel-Iran conflict could ultimately come down to one thing. A bunker. Get to know the name Fordo. That is the name of Iran's secretive nuclear site. It is the primary location for enriching nuclear fuel. It could be used to build a nuclear weapon. Now, the lab is built literally under or in a mountain, and it's believed that to hit it would require bombs. And maybe airplanes

that only the United States currently possesses. Let's talk about the defense side of the story. Morgan Brennan, of course, covers the industry for us, hosts the 4 p.m. show with John Ford and joins us now. The bunker buster bomb, you heard Fred Kemp talk about at the top and a B-2 bomber. If anybody wanted to go after this site, would it take direct U.S. help? I think the bottom line is, as I understand it right now, yes, if you're going to employ this very specific type of bunker buster bomb. Keep in mind,

there's a number of different types of these bombs. Israel possesses some of them, but the biggest, most powerful is the GBU 57 Massive Ordinance Penetrator. Yes, I know it's a nameful. You can call it mop for short. Precision guided, 14-ton bomb can penetrate down 200 feet before actually detonating, not to be confused with the Moab for that reason because it can penetrate. It's developed by Boeing, in conjunction with the U.S. Air Force, only U.S. B-2 stealth bombers are certified to operationally employ these mops, although they have been tested with B-52s in general. But either way, the bottom line here is you're talking about an American-made bomb for American uses that can only be delivered and deployed by an American-made aircraft. So to actually see this go to Iran

and to this specific site, which is half a mile under a mountain and be detonated, would mean direct involvement from the U.S. military and security officials basically saying to me now, both, you know, current and retired, that to see the U.S. become that directly involved, you're probably talking about Iran strikes or attacks on U.S. personnel or assets in the region for us to consider it. Boeing is the one involved here in terms of its manufacturer. Yes. Yeah, that would seem, let's hope, a highly unlikely outcome.

One would hope. Highly unlikely, yes. one would hope. That being said, Israel has hinted that they have other ways of potentially getting to Fordo. And certainly there's been talk about, you know, cutting power supplies, which is what we've seen at some of the other nuclear sites. Lots of questions around how all of that is going to play out. Because I think what I was getting at, Morgan, sorry to interrupt was that I was thinking, you know, listen, using U.S. technology as an iron dome to shoot down their missiles is one thing. That's a defensive posture. on the U.S. we both said that so far U.S. involvement and ally involvement has been specifically

that defensive in nature. Yeah, but and using it in an offensive way, I think, is a whole different thing. Yes, that directly brings the U.S. into this conflict. That being said, for investors out there who are tuning in and probably wondering, oh, the fact that defense stocks have been trading higher or going back and forth the last couple of days in the midst of all of this conflict erupting and playing out in real time is Israel is very, Israel is very, very, largely tied and dependent on the U.S. defense industrial base. So regardless of whether a mop gets deployed or not, and hopefully it doesn't, you are still talking about replenishment of munitions and missiles and missile interceptors for, you know, missile defense systems,

aircraft sustainment with F-35s and F-15s, and you're still talking about all of the U.S. defense contractors that ultimately those orders, those foreign military sales, are going to trickle back to. Israel has ordered something like 49. billion, according to Jeffrey since 2013, in foreign military sales from the U.S., so that number will ratchet up. Wow. And also, the other piece of this, Defense Tech, AI, Open AI, got a $200 million contract yesterday. I'm not saying they're involved.

I don't know. But what I will say is when you're talking about targeting and you're talking about massive data collection like we've never seen before from land, sea, air space as well with commercial space contractors who are in the mix here collecting data, what generative A.I. brings to the equation is rapid analysis of all of that data in a way that we've never seen before. So the Palantir's of the world, for example, are very much in play when you're talking about some of these strikes and some of the intel and President Trump coming out and basically saying, and I haven't spoken to Palantir about this, but there is such data now on the battlefield that didn't exist before

when you talk about some of these comments about knowing where generals and the Ayatollah are, et cetera, et cetera. Which blurs the line between defensive versus offensive involvement already, even before we talk about whether these particular bombs are going to be involved. So it's a great point. And by the way, Russia is using Iranian drones to attack Ukraine. One wonder if

Iran hopefully provides them with fewer drones. This is the other thing... Because they need to keep them for themselves now. Yes, and this is the other thing that investors need to understand here, which is that the mix of weapons systems is changing as well, as more of this technology makes its way into the battlefield. It's something I did a big feature

piece with the U.S. Army about, you can check out on CNBC.com because that mix is changing and it's going to make the budget that much more in focus. Not the time for cuts, in other words. Yeah, Morgan, thanks. Or tune in overtime, 4 p.m. Eastern time with John Ford. And Morgan Brennan. I'm joking. Who's that? The housing sector is still showing some signs of weakness, but our next guest is betting on a turnaround. We have some names to watch and market navigator next. Welcome back to Power Lunch as we watch the market's pretty much near session lows right now. The Dow's down about 8 tenths of a percent or 336 points.

Similar for the S&P, NASDAQ, a little more than that, Don, bond yields softening up as well. Classic kind of flight to safety amid the Middle East uncertainty. Absolutely. So it's been a rocky few years for the housing market. I mean, speaking of the kind of markets that are churning around right now, the higher mortgage rates out there, uncertainty in the broader economy are continuing to weigh on consumer sentiment. But our next guest thinks the market is ready for a recovery, believe it or not, and sees plenty of opportunities for investors to cash in on that rebound and sentiment,

specifically when it comes to housing. So joining us now as Matt Powers, the managing partner at Powers Advisory Group. Matt, this is an interesting trade because the home building side of things has been so good for so long. And we've seen a mini correction, if you will. What makes you think that you're bullish on this sector going forward? Yeah, thanks for having me, guys. You know, the housing market, it's clearly been on quite the ride. We were actually set up for a rebound earlier this year and trade and tariff worries around construction costs put that on hold.

So right now, affordability is the worst it's ever been. I mean, medium home prices are over $400,000 in the U.S. We've got rates on 30 years close to 7%. So it's just tough out there for buyers and in turn for builders that you had an analyst on the exchange in the last hour that gave some great color on this. The home builder sentiment index, which is mostly builders, is out. And it isn't great right now. But we're in a situation where you have to decide if you want to be ahead of recovery or behind it, there's still plenty of pent up demand. But some things certainly need to happen.

And he mentioned he thought that was skewed towards private builders, maybe not so much the publicly traded ones and that they could still, you know, be okay in this environment. His picks, though, were a little bit eclectic. I mean, he likes Meritage. He likes Builders First Source. What about you? Yeah. So, you know, we're always looking for opportunities, you know, of great companies that are at attractive value. you know, regardless of what it is. And it's not necessarily just a builder story for us.

We're looking at the entire housing ecosystem, so from materials to retail. And you can always look at an ETF like the I Shares Home Construction ETF, but there's a handful of companies that keep hitting our screen. So these three are all off double digits this year. So Lenar is the first. It's the second largest home builder in the U.S. They reported earnings yesterday. And they hit revenue targets, but they miss on earnings mostly due to some of the incentives they've been offering to move homes. But still, they're in a strong spot for any housing rebound. Their size gives them an edge over some smaller builders in certain markets. Main thing with Lanar, shares are down 16% this year.

The stock trades at a forward PE of 10. And it's well-blower started the year at 17. So the next, you could look at Masco, and it might not be a household name, but their brands definitely are. So think bear paint, Delta Fossits, kills like KILZ. About 85% of the business comes from the repair and remodel, which tends to bounce back before the broader housing market. And as home sales pick up, people upgrade their kitchens and bathrooms and paint and plumbing are usually the first things that they touch. So the stock's down 14% this year. They trade in line with their typical valuation and solid dividend name.

And then lastly, William Sonoma. So the first thing you would do typically after buying a home, look at furniture, maybe some cookware, some small appliances. Sure. They own big names like Pottery Barn, West Elm, and their core namesake brand. But a big tail one here is that more than half their sales are digital, which means some high margin, scalable growth. when home sales do pick up. Shares again down 16% this year, but the fundamentals are intact, and another very strong dividend payer. All right. Thank you very much, Brian. Matt Powers of the Powers Advisory Group. Thank you very much for that. Brian, I'll send us back over to you guys.

All right, thank you. All right, on deck. Why Morgan Stanley's Mike Wilson is feeling bullish about stocks. President Trump demanding Iran's unconditional surrender on truth social this afternoon after he left the G7 meeting ahead of time telling reporters he's looking for a real end, not a ceasefire between Israel and Iran. While the U.S. has not been directly involved in the conflict so far, our next guest says that wouldn't even necessarily be bearish for stocks. Let's bring in Mike Wilson, the CIO and chief U.S. equity strategist at Morgan Stanley. Mike, you know, market's selling off a little bit today, but to your point, this is nothing like what we might have seen if they're much bigger concern about massively spiking oil prices and

instability across the region. I think that's right, Kelly. I mean, you know, the president is obviously acting very tough and supportive of Israel, which I think is the right stance. But at the same time, he's leaving the door open for negotiations. And as you rightly point out, I mean, oil is behaving quite well. I mean, I think if oil were to spike to $90 or something north of $90, we'd have a real problem. But that's not the case at the moment. That could change.

I mean, we don't know how these conflicts are going to escalate. But right now, the market seems to be very comfortable with that. But that's not the reason we're bullish. We're not bullish because we're hoping for some conflict. here. We're bullish because earnings revisions have turned up and they've turned up meaningfully since the middle of April. And I think that's the real story here for stocks. It's not about all of these distractions. It's about that, you know, we made a significant trough in April, but from a market standpoint and from a rate of change standpoint on earnings. It's that simple. Right. So you, so

that's telling us that there's some, you know, economic momentum here that that could keep going. Does it matter, right? Do we have to just kind of resolve, get through a few of these issues versus this. There's a tariff deadline coming up in a couple more weeks. Yeah, that's right. I mean, we have a lot of things to get through. We have a tax bill still to go down. We have a, you know, a debt ceiling and a reconciliation process. We have obviously tariffs. We have this conflict in the Middle East. I mean, but there's always things to worry about. And that's why our process is very focused on what we can actually analyze. And what we can analyze is that once again, the rate of change on earnings revisions, on fiscal policy,

on even tariff policy and immigration, and all these things that were kind of dragging on growth earlier in a year, and I won't leave out AI, but AI CAPX is kind of bottom now too. Those are the more important issues, and it's creating opportunity to do things both long and short, quite frankly, within the equity market. I was to say it's a hard story to tell, isn't it, Mike? Because from your side and from our side of the camera,

and I don't think a lot of people fully maybe understand this, you know, it's hard to say, don't worry about what's happening in Iran or Israel because Nvidia earnings is going to be fine, right? You agree. That's a hard thing to say, but maybe that is the reality. Maybe the earnings growth for Nvidia and AI and Google

or whatever it is, that is not connected to, I don't think, all the stuff that's getting to headlines right now, is it? But that's hard to say. Well, I mean, it's a hard job, right? It's a hard job to be an investor. It's hard job to be a strategist. And I mean, that's what we get paid to do.

And we have to focus on what we know. So just like it was hard earlier in the year in January, we were saying negative things, which was challenging because everybody was bullish and the markets are going straight up. But we felt like the rate of change was now turning down. And so when things corrected significantly, that created an opportunity. So we're not here as Pollyanna as to say, oh, my goodness, you know, this conflict doesn't matter. Of course it matters. And the human life risk there is terrible.

So we don't want to diminish that risk. What we're saying, though, right now is it appears that the markets that are going to be most affected that would hurt equities, for example, oil prices, they're not really reacting to way that would be a problem. That's not the only thing we're watching. We're watching a lot of different things as well. But right now it feels like this is maybe a 5 to 7 percent correction type of an event for now. But we've got to stay vigilant. We can't just, we're not sitting here ignoring that. But what I'm trying to tell you is what most listeners don't appreciate is that we have a very best.

set up at the beginning of the year, we corrected for that. And now, actually, the fundamental drivers have turned. And that's what people need to focus on both at the stock level and at the index level. Understood. And quickly, Mike, you mentioned there's both long and short ideas that you see out there. Can you just get any more specific on both sides of that? Absolutely. And that's also predicated on kind of where we see the best revision factor. So on the positive side, first, I would say it's capital goods, companies, financials, as well as software. On the more negative side, it would be consumer goods, consumer discretionary, some of these areas that are affected by tariffs the most and high interest rates. So small caps as well, we think

probably continue to underperform because of the rate structure that we're seeing right now. But even there, I think there's some sight of line on a Fed that's probably going to get more dovesh in the second half of the year. So we've got to stay alert. We can't just sit on these positions. But right now, what I just told you, that's how we're set up. Understood. Mike, I appreciate you joining us this afternoon. Mike Wilson from Morgan. Stanley. All right. Let's get now to Courtney Reagan for a CNBC news update. Hi, Brian.

Two educational toy companies ask the Supreme Court today to quickly take up their challenge to President Trump's tariffs. Learning resources and hand-to-mind filed a joint appeal arguing the president does not have the authority to impose the duties on China. They asked the court to leapfrog over a federal appeals court which has

yet to rule on the case. Sean Diddy Combs' defense team said today their presentation could last less than two days, but not more than five. that likely indicates that the music mogul will not take the stand in his sex trafficking trial and could mean the jurors will be deliberating as early as next week. Prosecutors say they expect to rest their case in the six-week trial as early as Wednesday. Combs has pleaded not guilty to the charges.

Cordcutters have officially overtaken cable and broadcast TV viewers. According to New Nielsen data, streaming accounted for nearly 45% of TV viewership last month. Broadcasting cable represented about 44% of tune-ins. YouTube was the top choice of streamers followed by Netflix. Brian, back over to you. What did that guy, Dylan, sing, the times they are at changing. Something like that. Something like that.

But for the 44% watching us, hey guys. You don't need a weather man to know which way the wind blows. Courtney Reagan, thank you. Thanks. All right, coming up, how a small change in the proposed budget bill means big losses right now for one. Oh, there's the group. We'll talk more about it after this.

Watch is sponsored by crypto.com. Crypto.com is America's premier crypto platform. All right, welcome back to power launch. I said a few different angles at our power play energy minute. First up, it is a dark day for investors in solar stocks. Proposals in the latest budget bill

are crushing the group because the proposal is to phase out solar credits sooner than some other energy aspects. That is calling causing massive selling. You got sun run down 38%. Solar Edge 34, end phase, battery company tied to solar, down 23%. And first solar, the biggest of the bunch, down 18%.

Remember, Sanova filed for bankruptcy just about two or three weeks ago. Now, on the other side of that, so the big oil and gas stocks, they're on big time runs. ExxonMobil, Chevron, Phillips, 66. They're all on eight-day wind streaks and Marathon Petroleum on a nine-day wind streak. And it didn't get any attention because of Israel and Iran, Kelly. But Marathon had a fire in Texas City, Texas near Galveston at its biggest, the second biggest refinery in America had a hell of a fire on Sundays. Put out safely, thank goodness. But Marathon is actually on a nine-day run.

Right. Well, and of course, that always tightens supply on the margin. The solar stocks are responding massively to the version of the bill that came out of the Senate yesterday, obviously, which would sunset, though, sunset in 2028, if I'm not mistaken. for solar and for wind, keep some of the others in place for a little bit longer than that. So they would still have, you know, four years, three, four years before they went away entirely. But the reaction here tells you how important those subsidies are to the future of these businesses. And nothing's done yet, right? I'll throw it back at you. These are proposals.

Exactly. In a bill that is going to get passed, but we don't know what it's going to look like when it does. And what did Dan Clifton tell us? It's going into conference next week, perhaps. There's obviously huge outcry about something. In essence, the bill has become more business friendly, unless you're these businesses, a little bit more consumer friendly for some, you know, depending on the income, and much less friendly to a lot of other parts of the salt issue, obviously, a major disappointment for that caucus there. So it's nowhere near done yet, nowhere near across the family. Yeah, and I'm advocating for First Solar,

although I did write about them in one of my predictions two years ago. It's the only utility, or not the only, the biggest utility scale solar operator in the United States. They're based in Phoenix, Arizona. They're very different than putting some solar panels on somebody's house. Very different. Totally different. And everyone kind of gets lumped in together. Right. The most you can say about them is that they're only down 17% today for that very reason. Coming up, Amazon's prime days, prime week, really.

We have that story and more when power lunch returns. All right, a lot of serious topics that we have hit on on this fine program. And in the 1 o'clock Eastern Time show, The Exchange. Check it out every day. Kelly Evans hosted. She's fantastic. I don't even pay you to say that. Mary, you don't even, not yet.

I think I'm the first one to say Merry Christmas because Amazon Prime Day is now almost Amazon Prime Week. The news is this. It's now going to four days, Kelly. I saw that. It was one day. Why? Then it was two days. Does anybody think this makes it more exciting?

Here's my problem with Prime Day already, which I don't really participate in. It's too confusing. You don't celebrate. No. We don't at our house. We celebrate Festivist or whatever. Really? And no. Is you're the area of grievances? No, yes. I'm airing my grievances. I'm airing my grievances about Prime Day. Here we go. Look, the deals are not that great. It goes on forever. Every time you're on the website just trying to order diapers. You pop it. You're trying to get it off the screen. If they really wanted to make something more of Prime Day, they shouldn't extend it to four days. They should make the deals really deep, especially the terrifying time like this. So that's just my two cents on it. You do... One thing I love about you is that you get triggered by things I didn't... Like, Amazon Prime Day is now four days.

Kelly's like, I'm sick of it. I'm complex. Like, it's like you're just enraged. Because there's also this constant accumulation of stuff and this war to kind of figure out, like, ordering things on Amazon is so much for me mentally more exhausting than walking into a store. And, yes, that has its own difficulties. It's already this vast marketplace where you can't tell, like, our friends have discovered that you can order something. and it's this size instead of the right size.

It's like a manwich serving. It's, don't even start. We were in the commercial break talking about manwitches, don't ask, and serving size. Prime Day just is a layer of complexity that I just can't deal with. We're going to leave it here. We're going to thank everybody for watching, and we're just going to say that Kelly Evans is not a fan of Amazon. But a fan of Amazon for what it's worth. Thanks for watching Power Lunch, everybody.

closing bells right now.