Power Lunch - Dow drops as Trump tariffs rattle markets 7/7/25

Episode Date: July 7, 2025

Stocks sold off to start the week after President Trump posted letters to countries indicating new tariffs on imported goods. 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.

And welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Brian Sullivan. Tensions rising again in Washington. Trade War rhetoric heating up. White House weighing new tariffs on key trading partners, escalating concerns over global supply chains and inflation. President Trump sending letters to Japan and South Korea ahead of the July 9th deadline when the so-called reciprocal tariffs were scheduled to snap back to higher levels previously set in April. That's a lot. And welcome back, by the way. Thank you. Great to have you here, although maybe for what a day? I'm here for one day.

Markets are reacting as stocks are near session lows with investors weighing the fallout and the bond market flashing some signs of uncertainty. Political pressures and economic pressure is growing as Wall Street watches to see how far this standoff could go and what it's all going to mean for growth at home. All right, so it was a lot to do this hour. We're going to begin, though, with the latest of the trade war as President Trump announcing a 25% blanket tariff on imports from Japan and South Korea beginning August, first. There's a lot of conflicting headlines around these tariffs, a lot of date changes. Megan

Casella, try to make it all make sense because it's, it's hard to, frankly, it's pretty hard to follow. It is hard to follow, Brian, a lot of back and forth and new news coming out. It seems like every minute or with every new social media post. We did get those letters out from Japan and South Korea just posted in the last hour or so on truth social. You can see these letters on White House letterhead, the president reaching out to the leaders of both Japan and South Korea telling them that these 25% blanket tariffs, as you said, will be kicking in on August 1st just in the last few minutes. We also heard from the White House Press Secretary Caroline Levitt that roughly 12 more letters

will be coming out today to additional countries. She did not say to which ones, but all of those will also be posted to social media. So we'll be able to see which countries are getting letters and what tariff rates the president is setting. But a couple of top line details embedded in those letters, because you could see long letters. The first is that these were going to be effective August 1st, as we said, and that they'll be on top of any tariffs that are already in place or that are forthcoming on specific sectors. Any retaliation, the president says he will respond with equal additional tariffs, warning

them not to respond or retaliate. And he also says that he would consider an adjustment if countries do decide to open their markets. But here's the upshot, Brian. Not only is there no certainty here, really, because the tariffs could continue to change. They might not ever take effect if countries do. strike a deal. They also are kicking the can down the road to August 1st now. This is the deadline for those higher so-called reciprocal country-specific tariffs to take effect that were going to

affect something like 60 countries as of April 2nd. They initially were going to take effect April 9th. Those were postponed to July 9th. And Caroline Levitt just told us a few minutes ago that the president will officially sign an executive order extending that deadline once more to August 1st. So amid all the bluster and all the conflicting headlines here, That's the main upshot. We have to wait and see what specific rates each country is going to get for Japan and South Korea. They almost exactly match what they were originally facing back in April. So the only main difference here is moving that deadline from July 9th a little bit further to August 1st.

Is there, and pardon my density, but is there any then new tariff that we know of that will kick in on Wednesday, aka July 9th? We have to wait and see the text of the executive order, and it's a good question. Because like I said, there were roughly 60 or so trading partners, including the European Union, that were all set to see those higher country-specific tariffs. Everyone else got a flat baseline 10 percent. That remains unchanged. But for those 60 or so countries, we have to see if the executive order extends the deadline from July 9th to August 1 for all of them or only for a subset.

That's what we won't know until we see that text. The White House has not clarified that yet today. All right, Megan, thanks for now. Megan Kassela. The tariff uncertainty is a drag on the markets today, but our next guest remains bullish on stocks. As he says, the implications will move away from the broader averages to become more stock and sector-specific.

Joining us is Scott Cronert. He's U.S. Equity Strategist at Citigroup. I don't like specific. I like to just put it in the S&P and not worry about it, Scott. Well, Kelly, I think the way this is playing out is that we like to think of that liberation day time frame is walking us to the tariff ledge, if you will, where we were concerned about a broader disruption to, you know, many companies' business models sort of across the sector spectrum. And since that time, as we've kind of walked back and we've gotten a little bit

more granularity on country by country and the negotiating aspect to this point, the way we're looking at it is that you have to be a little bit wary of reading an entire index level implication to these country-specific tariffs. They're going to have much more direct influence on certain companies, industry groups, and sectors probably than the aggregate index. Right. So I found interesting as well that your, what's called, your Lefcovic indicator moved to, oh, in honor of Tobias.

I love that. It was in Euphoria territory. You said as of what Thursday? Yeah. So, I mean, what we're looking at here is we're getting this next wave of tariff announcements, which is certainly, relevant to be discussing in terms of the market action. You know, we're coming off of a really strong move in the broader markets, obviously. The growth cohort has been leading, which is something

that we've been advocating for. But what it's done is a couple of things. It's really begun to stretch the sentiment to where we've gone into something, you know, that we would consider euphoric. At the same time, when you look under the surface at what's implied in stocks, our work suggests that you're really beginning to price in an aggressive expectation. for earnings expectations from here. And that's going to get tested as a combination of where we end up on country-specific tariffs, but also as we go through the Q2 reporting period, which is, as you know, just around the corner.

You said aggressive and you said euphoric. Those are not words that would make me feel comfortable as an investor. Have things gotten a little bit stretched absent today, obviously? I mean, Brian, in our view, we're using a six. $6,300 ended the year target for the S&P 6,500 for mid-26. So we've run up to something that we'd consider close to fairly valued based on what we know about fundamentals. Now, our earnings estimates for the S&P 500 are touched below consensus. We're 261, consensus closer to 264.

We've been arguing for some time now in our modeling that 10% effective across-the-board, broad-based tariffs, along with a little bit higher rate for China as appropriate, here. But we're going to get nuanced. But my point here being is that, you know, this move has really begun to stretch a number of influences, sentiment, valuation, and even growth expectation. So, you know, color is structurally constructive on the setup as we go into the next back half of this year and forward. But in the shorter term, I think we have to allow for more of a digestion phase, which this tariff news, along with the earnings period, is likely to trigger. Are you talking about kind of rotation into things like small?

cap index or the NASDAQ, or are you talking even more kind of sector specific? And if so, which ones? Yeah. So we've dug in on growth as our mantra going into the second half, Q3 in specific terms. And so we continue all in on the AI related infrastructure spending tailwinds, which we think are pretty visible here, even with the tariff discussions coming in. So we're all in on growth, if you will. Now, where we've been underway, has been areas that's just consumer discretionary, staples, industrials, and materials, turns out that those sectors of the market, in our view, are a bit more sensitive to tariffs, the consumer space in particular. And so when we look at these country's specific data points coming in here, we're going to be

looking at them through the sector lens. And right now, we're trying to stare a little bit clear from where we've had good runs off the lows, where there's still some tariff uncertainty to be dealt with here. But in the meantime, stay as sort of our government. our guiding force here where we see these underlying spending tailwinds, which still point us down this growth, mega-cap growth, techcom services trajectories. Well, we actually have energy stocks, oil and gas on your screen right now. Scott, they're all down. I'm looking at your thematic 30 list.

No energy. There's energy related names that have to do with AI. There's no traditional energy companies. We've got the OPEC meeting Saturday. We've got the seminar we're going to this week. You don't like energy, clearly. You know, so it's really interesting in this, Brian, is we went into Q3. We kept energy at market weight. I think what's implied in the expectations here is not a big lift, but you're still playing with an underlying commodity influence. And you saw what happens. You know, any news on incremental supply coming in is going to keep a lid on that sector of the market. So we've we've steered clear of energy since the, you know, going into Q2. Interestingly, though, we did lift utilities to an overweight. last week. And there we see a little bit different scenario unfolding, just to kind of play this

out. On this AI infrastructure energy dependence tailwind unfolding here, we still think that there's an underlying fundamental dynamic that can keep certain areas of the market, such as utilities, you know, kind of in a more persistent, fundamentally improving place versus the energy sector itself. All right. Well, that's something. I noticed a lot more. So if in growth, Scott, to you is not even just in the tech space either. You've got a few other areas. Can you mention any individual names or no? Well, I'm trying to steer a little bit clear of the individual names. But I'd say, you know, we're trying to stay mostly aligned with the Mag 7 components. But it really begins to broaden out further into software where you've seen more

and more companies, which are off-cycle reporters, talk about their AI influence next-gen product sets and the traction they're getting already. Semis, a semi-competent. Inductor space continues to be showing signs of broadening within that industry group. And interestingly, we had been underweight the tech hardware space for the first half of the year. So we've come off that underweight, which is largely Apple influence and taken it to a market weight. So here, too, we're just looking for this broadening dynamic on where the AI spend is going is sort of what we think is the more relevant driver of fundamentals and stocks right now, while

we're still navigating this country by country tariff circumstance. No, and isn't everybody. Scott, thanks so much for joining us today. Appreciate it. All right. Scott Cronert. From stocks to bonds, let's get now to the bond report. The U.S. 10-year treasury yield on the move again, edging a little bit higher,

not a lot, but a little bit higher. It's at 4.38%. Investors reacting to another round of proposed tariffs and shifting market dynamics, the jump in yields reflecting growing concern about inflation and the possible ripple effects on borrowing costs, bond investors are also going to be watching that this executive order that Megan referenced at the top of the show that President Trump is expected to sign this afternoon

extending the so-called reciprocal tariff deadline for some countries to August 1st. And I think, Kelly, it's confusing, right? There's this and that. But I think if you've got some tariffs, maybe this Wednesday, some pushed off, that's going to be kind of what the market is mostly focused on. For sure. And yes, we're moving to Session Loz today because of that in a modest way.

We're nowhere near. We'd be down 10, 12, 15% if it was going to be back to April 2nd level. So I'm curious, you know what happens on that front. Lots more to come on the show. First, what impact could tariffs have on oil prices? And what impact are they having already? Plus a $9 billion tech deal and why the BBB has created some turmoil for Tesla. That's an interesting one. We'll explore it all when.

Power Lunch returns. All right, welcome back to Power Lunch. The Trump administration saying the tariffs announced back in April will take effect on August 1st for some countries that do not reach an agreement. Now, what happens if full tariffs hit? Well, it's not exactly the same. But look at this chart. If you remember, back in April when the Liberation Day tariffs were announced, WTI and Brent Crude Oil fell 20% in a matter of days right after the,

that announcement. Now, prices have recovered about half since. But if these tariffs actually are imposed, will oil and oil stocks also fall again? Because guess what? It wasn't just crude oil. It was also oil equities that tanked 20% before they recovered. Let's talk about all of this, as well as the latest news on OPEC ahead of their seminar later on this week with Dan Pickering, founder and chief investment officer of Pickering Energy Partners. I don't think, Dan, that the tariff situation is going to be as severe or fearful as it was back in early April and that 20% decline for oil and oil stocks. But your job is sort of to analyze risk.

If you were to look at worst case scenarios for both the commodity and the equities, what would they be? Worst case scenario, Brian, is more of the same. Oil goes into the 50s, potentially the 40s, if we had both tariffs, and the OPEC plus production increases that they're talking about. So, you know, if you want to play out the worst case scenario, it gets a lot worse from here, maybe worse than we've seen it so far. And what we really have to watch is how significant are the tariffs.

But I think even more, we've got to watch the how significant are the OPEC plus production returns. Yeah, and so again, kind of like tariff math, OPEC plus and OPEC math can be a little bit difficult to follow. It's difficult for me and I follow it pretty much every day. They had a meeting. It was very quick. Lasted less than 10 minutes. It was on Saturday. They added 548,000 more barrels a day per to the market starting in August.

They were sort of thought to be adding 411. So they're adding more barrels to the market every month. It's a total of about 1.91 million barrels. In a market that is already clearly well supplied, Dan, would you say the risk to prices right now is skewed to the, the downside, or are you happy with where we are right now? I think I'd take where we are right now for the rest of the year, put it in my pocket and go away, if that would happen. My guess is we are skewed to the downside, Brian, because you said it exactly. The market is well supplied, and we're adding more barrels with this OPEC production return. Even if some of them are only

quota barrels or paper barrels, we're still talking a million to a million and a half barrels a day. And so somewhere the system has to equilibrate. Inventories will build. But my guess is that that price is going to go lower to push some of the current supply out of the market to make room for these OPEC barrels. Dan, if you could, what's the layman's take on the impact of this new budget bill, which, as we know, rolls back some of the clean energy stuff, some of the incentives. But what is the impact on a lot of the traditional energy names that we cover, some of the new energy names, and just kind of on how that space is now going to evolve in the next. couple years. Sure. On the margin for the traditional energy companies, you kick the can down the road on the fiscal side, but that's probably good in the near term for demand. And so you see a little

bit better demand, which should help, although you're still facing this OPEC supply increase. So I look at the bill and think not a lot of net impact to energy companies, specifically, potentially some positive impact on the demand side. So net net, it's positive in the near term. We're going to have to deal with it down the road, but for now it looks pretty good. One thing the budget bill does do is it severely decreases the amount of money that would be available to refill the strategic petroleum reserve. Now, the president said he's going to, quote, fill it right to the top. I think that was a direct quote. In an effort to save money, the Senate and House agreeing that they will only give enough money to add a couple million barrels.

That was seen as incremental demand automatically being added to the market. That's now being removed, Dan. What's your take on that? Yeah, the SPR has not been particularly strategic. It's been tactical. It's been used to keep gasoline prices low. Prices for oil are now low. We should be refilling it.

I look at this. It's a bit of a political football. My guess is if prices continue to fall, the government's going to find the money and try to refill it. I know that Trump views it as potentially strategic longer term. We know Energy Secretary Chris Wright would like to see it filled. And so my guess is that we punt for now, but come back to it in a way that refills overtime. So where are we then? If WTI crude, if U.S. oil prices down around 67 a barrel and we've enjoyed pretty low gasoline prices, what's the biggest risk that could interfere with that?

Yeah, we just came through a Middle East conflict and saw that the price increase or risk premium that came into the market wasn't particularly dramatic. I think really the only way we see a big move to the upside and crude, which would then impact U.S. consumers, would be some sort of actual physical supply disruption. If in the Middle East, you wound up with something that blocked the straits of more moves or you had actual infrastructure damage, that's when you get into the high price scenario. we didn't see it in the midst of bombs falling a few weeks ago. And so I think the probability of that has gone down. But it would be some sort of supply disruption, Kelly, that's really the upside dynamic for crude here. Yeah. Yeah, paid $289 a gallon in Wisconsin this weekend. And, you know, and it's part of the agenda.

Now, listen, there is a big Dan OPEC seminar. It's not a meeting the meeting with this weekend. It's kind of a conference. It would be almost a better term. We've got a bunch of CEOs that are going there. We've got, of course, a lot of the energy world that is going to be there. We will be there as well. I know it's not sort of sexy to compliment OPEC in any form or fashion,

and I'm not complimenting them necessarily, but I will say this, that oil has been sort of between 60 and 80 for a long time now. I mean, after we went negative during COVID with oil futures prices trading at negative $40, we've seen some kind of cohesion. Do you worry now that by adding more barrels in a market that's at 65 bucks and change, there is any risk of any kind of a market share war, which would be great for drivers because oil and gas prices would go down, but kind of go back to the bad old days of OPEC where it's sort of every nation for itself? So far OPEC's been very unified in what they're doing. They haven't really paid much of a price yet. Oil is heavy. held reasonably well here in the 60s, briefly in the 70s with the conflict. I think the real test, Brian, will come when prices do make a downward move as this incremental

volume comes to the market. And so the real test will be when WTI is in the 50s, not when it's in the 60s. So is there a risk? Yes. The cartel has said they would be sort of following what happens in the market. So if price comes down, maybe you wind up with them doing a cut. as opposed to pushing individually for market chairs. So I think Saudi is really important.

Let's watch them. They're cohesive for now, probably will be until stated differently. I'm really interested to hear your takeaways when you get back to the Middle East or from Vienna. Yeah. I'll tune in Wednesday and Thursday. We will be there live all day and all night because it's six hours ahead. Dan Pickering, Pickering Energy Partners. And again, Kelly, yeah, we're going to be there.

Not really sure what to expect. We do know the Saudis will be there. the Iranians are going to be there. Russians are going to be there. A lot of CEOs are going to be their Shell, Baker Hughes. So you've got this world. We're also going to kind of shed a little light on OPEC. OPEC is an organization that a lot of people, you know, they don't have a lot of knowledge about, understandably. Neither did I. Sort of what is the group and what do they want? We're going to hopefully tell some of those stories. That would be great. They also have maybe this BRICS tariff to contend with. Speaking of tariffs, take a quick look at the Dow, which is moving towards new session lows,

down about 652 points. The president has just announced. five new tariffs on smaller trading partners, 40% on Malaysia, 40% on Laos. I know you were waiting to hear about Laos on that one. 30% on, it's no Myanmar. On South Africa, 25% on Kazakhstan and 25% on Malaysia. So again, this kind of follows on from the playbook. We heard from the Treasury Secretary over the weekend. We came in today with news that Japan and South Korea, more substantive trading partners would get higher rates. Now come a slew of other Asian countries that will see higher tariff rates, presumably if no deal is reached now by August 1, which is the new framework they've laid out. Do we read that as are these, those countries we do almost no trade with?

So again, no disrespect to those countries, particularly Laos, but are these viewed as this is what's coming if you don't agree to a deal? I believe so. And the reason also, when we talked about this with Megan, who will have more in just a moment, is because the administration is also signaled for the countries that aren't the bulk of our trading deficit. We're not necessarily going to have the resources to work out deals one by one. So the onus is on them now to basically, in other words, I would think capitulate or come up with something easy that we can actually agree to. The NASDAQ is down 1.2 percent. And as mentioned, we'll get a little more color, a little more detail right after this break. All right before the break, we had some new tariff headlines. Let's get more now

on them. Go back to Megan Kisela at the White House on what we know and again, still don't know, Megan. A lot that we still don't know, Brian, but we're learning more now. So five new letters were just posted on true social announcing tariff rates set with five different trading partners. It was Laos, Myanmar, South Africa, Malaysia, and Kazakhstan. It's ranging from 25% to 40% are the new ranges of tariffs for all of these countries. Now, the letters, as far as we can tell, guys, are verbatim, what we already saw sent to Japan and South Korea. So that means all of these tariff rates will be effective on August 1st, and all of them are subject to change either higher or lower, on how negotiations are going. So once again, sort of kicking that deadline down the road and

allowing for more talk here, even as these tariff rates are set. I'll also flag guys that in pretty much every case, these rates that the president is announcing are at the same level or lower than what he announced on April 2nd. So for Laos, for example, they're getting a 40% tariff on all exports they're sending to the U.S. On April 2nd, that was 48%. For Myanmar, they saw 40% on April 2nd, That was 44. Kazakhstan, 25% when it was 27. So in many ways here, guys, a softer stance, actually, than we've been seeing for the last few weeks, both in terms of tariff rates so far and in terms of that deadline, kicking the can down the road just a little bit more. That's for now. We do expect something like five to seven more letters throughout the day today.

So we'll have to see what those look like. I wonder, Megan, we're looking at these names, Myanmar, Laos, what else do we have, Kazakhstan? And then we had South Africa. And I was just looked at Kelly. And as you brought that up, I thought to myself, who was from South Africa originally? Elon Musk. And it just made me wonder if this was, you said, kicked the can. I wonder if this was a kick of a different kind,

because South Africa doesn't have a lot in common with the other four nations that are now on this list. Don't have to respond. I'm just throwing that out there. It's an interesting ad at an interesting time. It is obviously a much more developed economy than the other ones on this list. I don't know off the top of my head the amount of trade that we do with South Africa, but South Africa and Malaysia on this list are probably the largest trading partners of these five, but they're not really our largest trading partners.

I would say though, Brian, that while yes, it is coming at an interesting time, there were about 60 trading partners, remember, that got these so-called higher rates back in April. And for South Africa, seeing a 30% tariff now, that's exactly what the president did announce back in April. So actually no change there, although we might be closer to it taking effect. We just don't know yet. A lot of the other adjustments were a few percentage points here and there, basically to make them kind of rounded numbers, 25, 30%.

We do $20.5 billion, according to the U.S. trade representative with South Africa. Most of it's things like pearls and some minerals. I used to trade actually down at Richards Bay with them in a different life. That aside, Kazakhstan is interesting, guys. Can we bring up Chevron, CVX? We don't have any details on this tariff announcement, But I will say one of the biggest new oil projects in the world is the Tangis field in Kazakhstan. That is half owned by Chevron.

In fact, it's been a thorn in OPEC side because Kazakhstan and Chevron keep producing more oil than OPEC would like them to. And sort of OPEC's not happy with Kazakhstan. But Chevron is a big part of that. And I wonder, and I don't know, I want to be clear on that, folks, that I wonder if oil from the Chevron partnership would be tariffed at the that 25%. Great question. Because, of course, it would be bigger ramifications than just thinking through one of the 60 countries on that list, Megan mentioned.

All right. So as we head to break, let's get a new check on the Dow. Again, stocks were at record highs coming into today. We are now at session lows. The market stills rocketed back from the April tariff lows. But today, the Dow is down about 1.4% or about 638. Are we playing the movie in reverse? That's going to be the big question on equity investors' minds.

Are we playing the April to July rally in reverse now as we get the slew of new announcements? Well, I guess there was a thought that we're not going to follow through with some of these tariffs. The market clearly bought into it. Today, the market maybe is realizing a little bit that there is a tariff for us. Yeah, absolutely. We'll be back with more Power Lunch right after this. All right, welcome back to Power Lunch. Artificial Intelligence Hyper-Scaler.

It's called CoreWeave, saying it's going to acquire another core, core, Core Scientific. That is a data center infrastructure provider. It's an all-stock deal valued at $9 billion. The deal will strengthen CoreWeave's position in the AI arms race by bringing in critical infrastructure in-house. CoreWeave buying Core Scientific. Our core NASDAQ reporter is Christina Ports and Avelas. And she is following this deal. And I guess my question about this deal is what is this deal? What is this deal? Well, both companies have a very similar background. They started in crypto mining, and they slowly transitioned to offering AI compute. So just think of CoreWeave as renting GPUs as a service. What Corrieve is doing is taking a, I guess, a page out of the playbook of hyperscalers like Google, AWS, instead of renting future data centers, it's acquiring it so that they own all the assets and they can scale up. So essentially, they're acquiring core scientifics assets. They tried to do so last year. year. They offered roughly a billion dollars. That's what they valued Core Scientific at. And Core Scientific didn't like that dollar amount, so that deal didn't go through. And so this time around, it's valuing Core Scientific at $9 billion. So quite an uptick in this all-stock deal. But really, the share prices you can see on your screen are reacting negatively. There's a few

reasons. You add the rumors that have been milling about for a little bit since early June. So there could be some profit-taking. Some say maybe CoreWeave is overpaying. You know, because they just valued the company at $1 billion last year, and now Core Scientific is valued at $9 billion this year. And then the third part for Core Scientific shareholders is that under the new combined company, they'll only own about less than 10%. So there's going to be a lot of dilution when it comes to this for core scientific holders.

It's like what does it do? Like, both these names are pretty new, right? It's not like Intel buying somebody or IBM, and we kind of know at least one. of the players, Corweave, red-hot, relatively new IPO, core scientific. Honestly, I'd never heard about until talk about this deal came out late last week. Who are these companies? So they're data center infrastructure firms that rent out the compute,

because for smaller firms, it's really expensive to own all of the GPUs, also to even gain access to the most advanced GPUs, like NVIDIA's Blackwell racks, for example. Corweave has such a strong relationship with NVIDIA that it's one of the first to actually launch these racks. So that is part of the reason why they do well. They've been around, I would say, for a little while. We just haven't heard of them because of the publicly traded aspect. And core scientific, if anything, had struggled.

Just last year, they emerged from bankruptcy in January. So there's also concerns that you're acquiring a company that you're valuing at $9 billion when I think it was just the last earnings report. They missed analyst estimates. And then you also have that bankruptcy overhang. But essentially, you have to think of it as just renting out GPU space, Because, you know, for smaller firms or even bigger ones, it's just so expensive and extremely difficult to put all of these racks together, to transfer the data together. So a company like Corrieu says that they are the most nimble and most adaptable to the AI infrastructure compute world.

Even more so, Coriove has argued that they're faster at reacting to AI than the hyperscalers. And I posed this question to AWS when I visited their offices, and they deny that saying that they're just as fast and they've been working on AI chips for quite some time. but just think of it as like renting GPU as a service. Those are huge moves for you wanted to see on a finalization of a deal. Core Scientific down 18%. Christina, thanks for detailing it. We appreciate it. Christina Parts and Evelace.

And a quick programming note, Corrieve CEO is on Mad with Jim tonight at 6 p.m. Eastern Time. We'll be sure to press him a little bit more about all of that. Let's get to Pippa Stevens now for the CNBC News Update. Pippa. Hey, Kelly. The White House says President Trump will visit the site of devastating floods in central Texas. week, likely on Friday. The visit comes as Homeland Security confirms that 91 people have died so far as search and rescue operations continue throughout the region. The vast majority of the

deaths have come from Kerr County, where officials say 75 people have died so far, including 27 children. Authorities say a 27-year-old man died this morning in a shootout outside of a U.S. Border Patrol facility in southern Texas. Law enforcement officials say the man had an assault, rifle when he started shooting at federal agents who returned fire and killed him. They also said they found backpacks, a second rifle, and more ammo after the incident. A Border Patrol employee and two officers were hurt in the shooting. And House Speaker Mike Johnson is set to meet with Israeli Prime Minister Benjamin Netanyahu tomorrow morning a day after President Trump will welcome the Israeli leader to the White

House. Netanyahu's visit comes as the president says Israel and Hamas could strike a U.S. brokered ceasefire deal in Gaza as early as this week. Kelly? All right, PIPPA, thank you very much. Pippa Stevens. As we had to break, check out Tesla on pace for its worst day in more than a month. But headwinds expected from the president's big beautiful bill impacting the shares and also driving the CEO even deeper into the political sphere. We'll dive into all of that when power lunch returns. CryptoWatch is sponsored by Crypto.com. Crypto.com is America's premier crypto platform.

Welcome back. Tesla shares are down 7% today. A lot of it tying back to the budget bill, actually. William Blair downgrading the stock, not just because that $7,500 EV tax credit is now gone, but because of the elimination of the corporate average fuel economy fines. That has been a big part of Tesla's profitability and its gross margin, and that removal could be more serious for the outlook now. As the analyst told us last hour, there's only so much you can take. The passage of the bill seemingly driving Musk further into politics as well. He took to his ex-platform to criticize the two-party system, basically, announces he's forming a new America party, which is further fueling investor worries about how he will be spending his time and attention today. Let's dive deeper into it with our own Philabo. Phil, it's good to see you again, and let's start with the potential loss here of a lot of income and a lot of profit margin from this change in the budget bill. Yeah, that has to do with the zero-emission vehicle credits. Now, we're not talking about the $7,500 incentive that goes to use. you and I if we were to buy an electric vehicle.

That's been known for some time. That phases out. It goes away after September 30th. I'm not sure how much of an impact that's going to have in Tesla, but clearly for any EV company, there will be some impact there. The zero emission vehicle, Credit Kelly, is tied into greenhouse gas emissions, and this ultimately ties into the California Air Resources Board's ability to, say, their standards that they have set and about a dozen other states,

they have the ability to put those in effect in which then companies, if they can't meet those, then they would have to pay a fine. Now, Donald Trump in June said those have gone away. We're nullifying that. Well, it's because of a waiver that the courts gave California years ago, back in the 70s, that allows them to put that waiver in place. It's going to be fought out in court. I understand what William Blair was saying in terms of if this goes away, then that's

$2.8 billion selling Zeb credits, though I should. also point out that people we've talked within the industry say it's not entirely clear if the sale of Zeb credits will go away completely. Oh, I see. So there's actually a chance that it won't be as punitive as feared. So the shares could be down maybe some extent on that risk. It's unclear at this point. It's unclear. And also just because, presumably, I guess, because of how he's spending his time and potentially attention and money on the new party. Well, I think that's what's weighing on the stock more than anything else. Look, you saw that when he went to war with Donald Trump, what, about two or three weeks ago, shares of Tesla got rocked because people sat there and they said, look, the last person

you want to pick a fight with is the president, because he's going to win in the end. And then when Elon Musk said, yeah, I probably got to, you know, said too much, things started to come back. You saw Tesla shares recover. Now he's saying, let's form a new American party. We will be a force, whether it's with two or three Senate seats, eight to ten House of Representative seats, but the country needs another political party. He did not come out and say, look, this is because Donald Trump and his administration have crossed me or I don't feel confident in them. But the implication is here.

He's focusing on politics instead of focusing on Tesla. At least that's the perception of some investors. Now, Elon Musk would probably say, as he told our David Faber, I'm going to do what I'm going to do, and when David said, well, what do you think about the perception that you're not, you know, you shouldn't be doing certain things. He's going to say, I don't care. That's how Elon Musk operates. So to an extent, you could sit there and say, if you're a Tesla shareholder, you knew this. You knew all along that Elon Musk may ultimately get more involved in politics. On the flip side, if you're a Tesla investor, you're saying, I want you to focus on robotaxy,

humanoid robots, the things that will contribute to the bottom line. Makes sense. And meanwhile, looking at the impact of that tax credit, Phil, the point that the analyst brought this back to was just that it makes, if the company has to lower prices, Brian, in order to compete, that also hits profit margin. So it's kind of a double whammy. Yeah, I just wonder how the tax credit going away to Phil's point, but you do wonder how it might impact sales. I did a Twitter poll, two-thirds of the people, by a factor of two to one, to quote Elon Musk, said that it didn't matter to them at all. Now, again, it's a selected people who follow me are going to probably think a certain way. But two to one said, no, the removal of that $7,500 tax credit, a lot of those people said it didn't impact them,

which implies they have a high enough income that they're not eligible for the tax credit. I guess. I mean, because $7,500 is a big number. You know, you start moving for decades. You start moving from, eh, it's 30 to no, it's 40. Well, listen, Phil's in Chicago. I was in Chicago yesterday. I drove down 94 to 294 to 904 to 90.

from Wisconsin down. I saw two EVs. I saw one Tesla in Chicago, and I saw one Rivian near the Milwaukee area. That was it. There are in many ways those dynamics aren't going to change $7,500 or not of what works to drive around this country. All right. Should you buy shares of this power player? The stock is up 7% in a month. The name and the trade in three stock lunch coming up. Welcome back. We are overdue. Let's do some three stock lunch, where we hit three key names and I started. guest how investors should be trading them. And our guest today is Will McGuff. He's prime capital financials deputy, CIO. Well, it's great to have you. I want to run through a couple of these, get your ideas on them. Let's start with an under the radar power player that could benefit from the ongoing AI data center build out. It's Eaton, our mystery chart from moments ago, up 7% the

past month or so. What would you do with a stock like Eden? Well, thanks for having me, Ellen Kelly. We love Eaton. As you mentioned, they're in the AI and data center, but the other buzzwords that defense spending are also upstream from their power grid and data here. They've got rock solid, fundamental, strong balance sheet, consistent free cash flow, great returnal invested capital. They're roughly three times bigger and slightly cheaper than their closer correlated peer. So we would be a buyer here for this thing to go higher.

All right. Pretty clear fan of Eaton. Next one's different. Adobe. It's related to AI. It gets lumped. They want to say their AI. analyst Rothschilder company.

Redburn said the tech company will actually, AI will actually hurt Adobe. What's your take on ADBE? Yeah, I would agree with them. So one of the things that I like right here is looking at antiquated, old giant tech companies that were around in the dot-com bubble 25 years ago that haven't evolved. And Adobe is one of those.

They're facing competition from Figma and Canva AI. Their revenue growth slowing from 14% to 9%. So I wouldn't touch this one. They need time to reinvent themselves. And so even with the steep discount from the pullback they've been in, I would sell it here and wait to see how management re-evolves them over the next five to 10 years. All right. Then what about, and this one's a little bit different, stock that's been on a tear lately as well.

Coinbase, the crypto exchange, the 40% year to date. A lot of people kind of wondering why Bitcoin prices have stalled out a bit here. But what do you do with Coinbase well? Yeah, so Coinbase is interesting with the Genius Act making its way through Washington, D.C. right now. Bessett was talking about stable coins as well, and that market becoming a $2 trillion market in the future. And Coinbase is primed to be a huge player in there. So we think they deserve to be diversified amongst the likes of Visa and MasterCard and the financial services sector. And so a very volatile stock, huge range.

Therefore, I'd behold right here for the long term. All right. Diamond. No. Will, thanks very much. Appreciate it today. Will McGuff. And remember recap every three-stock lunch. Anytime you want, just scan that QR code or head to CNBC.com. All right.

We're going to wrap it up after the break. And we're going to talk about Amazon Prime Week. Used to be Prime Day. Now it's Prime Week. And there's a lot of competition. Before we go today, right? Is it today? We kick off?

Maybe tomorrow today. Prime time for online deals. because Amazon's four-day summer, yeah, it's tomorrow, July 8th. I do remember that from the gazillion Amazon boxes. This time Amazon Prime Day slash week is getting some real competition, as big retailers like Target and Walmart Brian are jumping into the fray with their own big deals like Walmart's offering, you know, first access for its Walmart plus subscribers and all that sort of thing.

Here's the eye-catcher. Not only because, you know, I kind of shrug this one all. I just don't think the deals that great. The spending is unbelievable. It's more basically than what we get over that. period of Thanksgiving and Black Friday. It's crazy. And Adobe thinks it's going to be up 28% year on year. Well, does that 28% include an extra day, though? That's what I don't know. Is that the same days or is that adding a day? I don't know. I don't know. But they're trying

to create like a snack. You know the meal industry? They're trying to make a fourth meal because we don't eat enough. You're going to add the snack. About 3.30. It's great time for a snack. I hope that I'm pleasantly surprised by checking out these deals. And if so, they can extend it as long as they'd like. I'm going to go to the airport. Thanks for watching I know safe travels. Thank you. We'll see you soon. And closing bell starts right now.