Power Lunch - Dow drops, S&P retreats from record as Trump escalates trade battles 07/11/25

Episode Date: July 11, 2025

Stocks dropped Friday, a day after the S&P 500 posted a new record high, after President Trump announced a 35% tariff on Canada and threatened higher tariffs across the board. We’ll tell you all you need to know. 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 Lunge alongside Kelly Evans. I am John Ford, and stocks are under pressure at this hour as the trade war rhetoric escalates dramatically. New threats of steep tariffs, 35% on Canadian imports and talk of 15 to 20% duties on a wider range of trading partners have rattled investor confidence. Yet, during this uncertainty, tech is bucking the trend. The sector has hit fresh record inch of day highs led by, you guessed it, Invidia. And the market's focus now turns to second quarter earnings. The rally this week suggests investors are bracing for some pretty solid results, but we have trade tension simmering. We know every earnings call could shift sentiment and maybe give us some more data points.

The key sector next week to kick things off, the financials. We'll hear from the top tier banks like JPM, Bank of America, City, Goldman, Morgan Stanley, and all eyes will be on trading revenues, net interest income, and of course their guidance. And color. I like the color, most of all, really. Analysts have been trimming estimates after a choppy spring, though, with S&P profits poised to grow about 6%. year on year, and that's key for valuations from here. Our Mike Santoli is live at the New York Stock

Exchange to follow the action and give us a preview, a curtain raiser, Mike. Yeah, I mean, Kelly, first of all, this week, I think the market has acquitted itself about as well as you might expect, given the headlines on the kind of re-escalation of tariff rhetoric, and then how hot the market was coming in, right? A three-month sprint hire, one of the strongest rebounds ever in history. and we've kind of cooled off in a very benign way by just rotating around. NVIDIA up and then a lot of laggards also getting picked up as some of the momentum stocks pull back. Now, looking ahead, yes, we have earnings coming up next week. The bar has really been lowered quite a bit.

I think the big question that's going to have to be answered incrementally is whether investors have already implicitly assumed we're going to get another one of these six or seven percentage point outperformance when we finally get all the reports in because that's what it's been in the last two quarters. few quarters, really huge margins of beat and how we just gotten used to that. Are we going to get to sell the news response? I don't think there's necessarily a reason to feel as if there's going to be lots new to worry about in the earnings reports. To me, the question is, has the market gone from peak uncertainty three months ago to a point where we're kind of already assuming we've got some things figured out and therefore there's room for some downside

surprise? Is the question, how much do companies go out on a limb with their earnings guidance commentary and say anything about potential tariff impacts or is the market just needs to discount all of that until we have more information in August, I guess, about what exactly that'll be? I think, John, the market is right now very intent on localizing, isolating the direct impacts. And I think that's kind of already flowing through some of the numbers. If you look outside of tech, if you look at some of the tariff exposed companies, look, they've already had their forecast cut back fair. bit, so maybe some of them have been de-risked a little bit. The contrast to me with April

was, one, just the magnitude of the proposed tariffs on April 2nd. We're so far beyond what anybody thought. But also, the market perceived that the administration was almost engineering and economic downturn. It was going to be this detox period. It was all this talk of pain before gain. And so the application of the hit was broad. It was to the all economy, we're pricing in a recession. Now it's not like that. Now it's about how much can be absorbed at what pace, which companies are going to be net winners and losers. All right. Mike Santoli, thank you.

Well, risk trades might be back with tariffs, earnings, and the Fed's rate policy, as we were still just discussing, could all derail markets? Our next guest says a lot of the good news is already priced into stocks, making further upside harder to come by, while high valuations meet high downside risks if earnings disappoint. Joining us now for more is Tom Ullick, CEO and managing partner at Strategy Asset Managers. Tom, to what degree do we need to think about international markets as a risk versus an opportunity? I know you like Mercado Libre.

We do. And thank you for having me on set today. Nice to be here. We like the international markets with the dollar depreciating against the foreign currencies. We see a tremendous advantage for some of the stocks that we've put our clients into. Mercado Libre is one of those. And that's an e-commerce company that also is very high into fintech. Although it was trading down on some of the Brazil.

But it's Argentinian. Well, Argentina is one of the benefits, the benefactors of it. There's a great turnaround story there from their country standpoint. But we really like this kind of stock because if you take a look at the advantages of the growth in Latin America, South America, it's far greater than we think in Europe at this time. So we like that. And you mentioned top level to weak dollar, which, I mean, look, this is one of the greatest quarters we will probably ever have. for sheer dollar weakness.

We were down 10% of the quarter, was about half of that. Right. And it was 10% for the first half of the year. Well, it benefits the United States to have the soft dollar from the trade policy. And if you think about it, the United States really is going to try to balance out the economic imbalance between tariffs and the taxes

that are in place. But we're really set up to be in a very good position. We've been talking to our clients about how to look through the noise and try to advance beyond that and look confidently down the future. We think that there's a very, very strong sign for a next generation bull market ahead of us. But at a minimum, a weak dollar

should help all international stocks, right? Yes, it should. Just literally in translation effects. If I'm holding, you know, the currency goes up and makes the performance better in dollar terms and so on and so forth. So is that already priced in? Or do you think that, you know,

look at the international performance we've seen elsewhere. Should we expect similar in the back half of this year or now? I definitely think it's priced in. I think that the market's gotten a little bit ahead of itself at this point. and we're going to take a breather for some period of time. But the outlook is very, very positive going forward. A weak dollar is not going to harm the U.S.

I think it's going to be a benefit for net exporters. And you can see that right now with the earnings reports. Speaking of looking ahead, bringing it back closer to home and thinking about the Fed, we know what President Trump wants when it comes to a new Fed chair, somebody who's going to get rates lower. Now, there's more than just the chair to working that out. How much influence do you think the next Fed chair, who the president presumably is going to appoint, is going to have over the rest of the voting members, and how does that factor into your

looking ahead and perhaps optimism for the markets next year? Well, we've been talking to our clients about Fed rate cuts as early as July happening. However, we've pushed it out towards the end of the year for two rate cuts. having said that, when you look at what the shadow Fed Reserve Chairman could be in place and dictating the terms of what's ahead of us, we all know that the deficit is way too high. We know that the rates have to come down eventually. When it's going to take place, we really don't know. But impacting on earnings, I think that the CEOs of the companies that we own have already priced that in.

And as the market takes a breather, we'll catch up towards the end of the year. Yeah, we talked about some of the international. We also like Lilly, which has not been a great stock. lately. Kind of Morgan. I mean, again, the energy space. So just where are the, you still like the whole AI trade, the AI story. So what are some of your most like high conviction places to be? Well, I think health and health care is a very important sector to concentrate on it, specifically like biotechnology and pharmaceuticals. And although Lilly is kind of pulled back a little bit, they still represent a huge market with the GLP-1 drugs. And there are a billion people across the globe that are

obese at this time that could benefit from it. And we're seeing additional indications that the GLP drugs can help with inflammation. And there are going to be all sorts of benefits from it down the road. And if you transfer that over to the pharma and the biotech area, I was just in Dubai a couple of days ago. We were talking about the next generation vaccines and personal cancer vaccines that are in front of us. It's an exciting time. And I think the stars are aligning for a huge advance in biotech. Looking at your top five holdings and looking at your picks, it doesn't seem to me like you're trying to pick the software winners in AI going forward.

It looks like you're focused elsewhere. Is that a valuation issue? What would it take for you to say, okay, we're going to play some bets here, here, and here on how this plays out and who wins? Well, you know, we're an active manager. We've got four different portfolios. And the benefit of that is that it's what you own and what you don't own.

that can really benefit the client going forward. So we have, we've steered away from some of the tech names right now, and as the market broadens out, we're very, very comfortable with the tech names that we already own. Of course, the Nvidia is the Microsofts. But we also avoid some of the companies like the apples right now. We're avoiding Tesla. And those are names that are commensurate with everybody's portfolio nowadays,

but it's what we own and what we don't own that make a lot of sense. Palantir? Love Palantir. Great company. All right. So not saying away entirely. When did you get into Palantir? Well, very early on. How? That's a story for the clients that we have. We had an early option to go into the company and we stayed with it and we're benefiting from it. Because there are people today who got this Palantir. It's a black box. That's why I'm so curious. You know, talk a little bit about what they're doing. Are there any others right now you feel really excited about too? Well, defense, cybersecurity, national security, all at the forefront of the United States leading the world going forward. Palantir is at the forefront of that. We think it's a stock that you should own. We also own some of the defense names like Lockheed Martin.

But there's some, as you know, everybody's going to try to catch up on the increasing their defense spending. And that's going to pour over into the defense names. But Palantir's a very good company to own right now. And it's been a very good company. That's the thing they go, well, yeah, I would have liked to get in 10 years ago. But I guess, I think about Netflix. Like this stock was that you could have bought it in January and be up 60%. Same with Palantir, right?

And so you have no qualms with people getting into these stocks, some of these high flyers now at this point of the game. Well, we have had conversations with our clients to kind of quell the volatility, you know, question that's out there. And I think they've become more educated along the way. You have to own technology. You know, it's one of the largest sectors of the S&P, but it's what you own and who you own that makes a difference.

And as I've said before, you know, we like some of the certain names, and we will overweight in those names, as we just mentioned. But the market is broadening out, and that's benefiting our clients. The utility sector, who would have thought that the utility sector. Right, exactly. But power, energy, very important right now, benefactors, utility companies, nuclear. We like NLR, which is an ETF in the space of energy, uranium. Interesting.

Uranium guy too. You seem low-key, Tom, but you're like in all the hot stuff. Yeah, it was just in Dubai. There's just so much optimism out there on our side. And I think it's going to be a great decade for investors. And, you know, as you've reported before, technology is going to lead the way. way, but we're going to see some advancements that are going to just blow everybody's mind over the next decade. So we're pretty excited about it. All right. Tom, thanks. Tom Hulik.

Thank you very much. And the Treasury just released its monthly budget statement, giving the constantly changing status of trade and imports. This could give us some insight into the revenues being collected. Megan Kasella has those numbers, Megan. Hey, Kelly, always our best look at tariff revenue every month. But first, top line, it was a mixed bag this month for the U.S. Treasury on an unadjusted basis, the U.S. government had a $27 billion surplus for the month, and that compares with about a $20.5 billion deficit expected among economists surveyed by Dow Jones. But then if you look at an adjusted basis, this accounts for standard calendar differences month to month. The U.S. ran a $70 billion deficit in June. So big difference

there. Fiscal year to date, the U.S. is running a $1.3 trillion deficit, almost exactly matching its pace from this time a year ago. Then on the tariff revenue, that's the other key figure here. The U.S. took in $27 billion in June in customs duties. It's the category that includes all tariff revenue, so it's a little broader than Trump's tariffs alone, but it has been growing this year as the tariffs have kicked into effect. So far, this calendar year, the Treasury has taken in $87 billion in customs duties. So that's roughly how much has come in since Trump has been in office. One final thing. Treasury is definitely taking in more in tariffs, but it's taking in significantly less now in corporate taxes. Those were down 17% for the

month of June. And a Treasury official said that was likely due to anticipation of what they called preferable expensing and deduction provisions, including in Trump's megabill. Guys, that fact is something Brian Reynolds, some of the market watchers have picked up on. They're a little worried about what it could signal for earnings season. You also wonder if it's just the give and take, you know, more tariff revenue, but a little less corporate tax revenue. It's interesting. Yeah. We have to see where that. shakes out right now overall for the month it was about $20 billion extra compared to baseline in tariff revenue and about $14 billion less in corporate taxes. So still more on the

tariff revenue you have to see as this goes on. Does trade adjust enough that the tariff revenue continues to increase or does it fall off and just how much do corporate taxes do the receipts change on that side to see where it evens out? Megan, thank you very much of bringing us those numbers. Megan Casella in Washington. Well, here's what's on the menu for the rest of the hour. Goldman Sachs, It's first AI software developer, like the software developer is AI, plus some earnings insights in today's three-stock lunch. And up next, a special bond report. Power lunch will be right back. Welcome back. Let's keep an eye here on yields. We just got that Treasury report.

One of things we're closely watching is the steepening of the yield curve. There's the two's and tens lately. 51 basis points. I think that's good news. Rick Santelli is here to explain. He's in Chicago joined by Jerome Schneider, Pimco's head of short-term portfolio. management. Welcome, guys. Yeah, it's going to be a fun interview. Jerome, welcome, and let's start right into it. All the traders I deal with always seem to lately ask the same question. If you look at markets, whether you look at the S&P 500, the NASDAQ, the Dow, or 10-year yields from Liberation Day, the market certainly seems to be viewing future tariff uncertainty and negative aspects in a much different light than Fed officials and economists. And it seems like if you've kept up with the minutes, and I know you have, that the Fed's now split a bit.

Is it safe to say that the markets have changed some Fed members' minds regarding the stability and the future outlook of the economy? Well, it's a valid question to ask if the market has bullied some of the Fed officials, especially those on the hawkish side. But ultimately, these Fed officials are going to be focused on the data. And the data continues to portray an environment that at least currently has some resolution. in the job sector, has inflationary numbers that are well above the Fed target, and in that regard, the Fed's going to simply maintain their optionality as they have. So while there is a louder discussion what is going on with regard to the perspective of having potential cuts, the reality is that those cuts will probably come later this year and into 26 once they see some of that

data turn and the softer job cycle does appear at that point in time. But for the time being, the focus is on inflation, and there is some comfort for the hospital. and even some of those sitting in the middle, that inflation hasn't necessarily run its course in that tariff discussion, they know it's an iterative game, and ultimately those tariffs haven't fully seen that run fully across the finish line. So there could be some increased pressure on inflation. Let me stop you a second, okay? Many Fed officials, including the chairman, if I'm not mistaken, have basically inferred that was it not for the uncertainty of tariffs, they would be easing. Then all of a sudden it's inflation.

Inflation really hasn't changed the last mile, in my opinion, in the last year. It's not at the 2% target, but it really is kind of stuck in the mud at levels that haven't changed dramatically. So the Fed is really looking at inflation anticipation versus the current reality of some of the numbers. And if you look back in the past, long-term capital, credit crisis, all these issues, the Fed never knew they were coming. Shouldn't the Fed deal in the here and now and the numbers today as opposed to having a view in the future? Didn't they learn anything from COVID and their

inflation expectations back then? Unfortunately, they are dealing with the here and now right now. The inflationary numbers actually, we think at PIMCO are going to be a bit higher, going as high as about 3.5% CPI core by the end of this year. And so those tariff implications is another thing we're actually looking at here at PIMCO. What's going to be, wait, wait, what's going to be

driving 3.5%. That's a big jump. Fair question. It's the evolution or the removal of the downward trends of inflation. Are you modeling tariffs? Yeah, I don't know. Tariffs are one part of the equation. But you also have the deflationary impacts which were coming in earlier this year and late last year,

which are being removed. And so that's part of the upward momentum. But ultimately, that's not necessarily the immediate justification for not cutting. We do believe at Pemcoe, you're going to have some cuts later this year. It's all a matter of timing at this point in time. And for investors, they should simply be focused on the fact that in the front end of the yield curve, we have some pretty attractive real yields and attractive yields to be had despite inflationary concerns. The real question is what happens at the longer end of the curve at this point in time. Well, you know, today is a perfect example. Kelly, you were spot on. We've had four basis points

of steepening in the curve in a very quiet session. We're now over 50. And I know historically, we've been much higher, much wider in that spread. But, you know, in 2019, pre-COVID, the spread was more, it was much lower than it is. Now, I guess what I'm really considering here is that I agree. The curve's going to steepen because of debt and deficit issues, much more than inflation issues, in my opinion. And what will that do for the dollar? Everybody's very negative the dollar. It's fighting down at these levels to stabilize. Your thoughts? Yeah, two words, term premium. premium implies what is an investor going to pay for the acceptance of some inflation risk,

as well as some additional issuance to come within the Treasury sector? That issuance is coming, we know for sure, initially in the T-bill sector, but over time, out the curve will have to be met by demand, not only by domestic investors, but foreign investors. And so those foreign investors are going to have to be incentivized, and they're going to be incentivized by a higher term premium, which comes with a steeper yield curve. So deficits is one factor to think about. The second thing to think about is obviously the credibility of the Federal Reserve in the longer term, not in the immediate sense.

Obviously, there's discussions going on with the U.S. dollar and the long-term standing of the U.S. dollar. These are all factors which will make investors demand more premiums out of the curve. My last question. My last question, do you think, given what stocks have done, given the steadiness of interest rates, yes, we've steeped, but they've been very stable. Do you think the Fed needs to ease right now? I question their outlook on the economy in general. But do they really need to ease now? Your final thoughts?

July seems to be off the table. You probably get some easings later this year. No, no, I'm not asking what the market is saying? What do you think? If you were king, do you think you would ease now? Yeah, not immediately. Later this year, the numbers might suggest that you need to. But really, it's a 2026 question in terms of,

how to meet the job demand. I completely agree. Jerome, it's always a pleasure. It's always a pleasure. And in terms of jobs, the last report shocked even me. Thank you for joining me today. John Fort. It's all yours.

All right. Rick Santelli. Thank you and Jerome Schneider as well. While earnings in focus as well, it's not just the banks you need to pay attention to, bullish calls on Netflix ahead of its results. We're going to binge on that name and others when Power Lunch returns. Welcome back to Power Lunch.

Piper Sandler, seeing some strong momentum for key tech names heading into earning season, specifically Netflix, raising its price target on the streaming giant to 1,400 ahead of results. It's just under 1250 now. Similar move at needam raising the price target to 1,500. Interestingly, that firm highlighting Netflix's labor productivity, saying employee culture and quality are bringing value to shares, Kelly. I mentioned this in passing earlier, but they're up 40% since. January. And what was significant about January? We got those earnings. This is important going into the earnings season as well. Their fourth quarter was so massive. I think they had their most

subscribers ever. Now, they had the football games on, I think, Thanksgiving and Christmas Day. They're just starting to get into live sports. So they came into the year with so much momentum, literally just from the bread and butter of the business. And until or unless that stops or slows down, I mean, the sky's the limit. It feels like since COVID, they've really zoomed ahead, right, despite Apple's F1 investment of the other streamers. There were all these hopes that with what Amazon was pouring, with what Disney was doing with Disney Plus, they would sort of mount the Warner Brothers Discovery.

Really, the appetite for investment of media companies pouring into that content and the approach that they took does not seem to have staying out. Well, and they're at the flywheel part of the business cycle. Others are a little bit earlier in that narrative. I think there's room for a lot of different streaming players in the way there used to be room for 150 TV channels. It just looks a little different these days. And their financial model is so superior.

I mean, they can spend more on content than I think the market cap of Paramount maybe twice over right now. They just, it's in an arms race, they've got kind of the most power. There's also the expectation that they've got pricing power on the plans side. And so that bolsters some investor confidence drives some of these upgrades. You're right. Especially when they introduced the ad tier, which this is Laura Martin's price target call today. And she was the one who for years was saying this was a move that they needed to make. They resisted it because it wasn't quite their ethos at the time.

But now they can just keep charging advertisers more so they don't have to charge the customer necessarily. That's kind of a nice place to be. Tadum. Meanwhile, Goldman Sachs is making a major move on the AI front. That could lead to a sea change in the industry. We do have those details next. Welcome back. Goldman Sachs going all in on AI. In a new piece out this morning, our Hugh Sun reports, the bank is testing an autonomous software engineer from AI startup cognition.

First Bank on Wall Street to do this. So what exactly is an autonomous software engineer? he was here to talk about that. So you've heard of autonomous driving. This is autonomous software writing. And essentially, I mean, as the chief of tech Goldman Sachs explains it. So there are a couple of disciplines out there. And coding happens to be one of them that really lends itself to reinforcement learning,

which is learning like kind of how people do, which is, you know, an AI takes a dataset and it gets prompts which are, you know, rewards or penalties. And in this process, and because coding either works or it doesn't work. Right, very AB outcome. Exactly. And so it lends to a process in which his belief is that coding is essentially an AGI even today. And so this is something that is on par with the best human being coder. And again, cognition labs, you know, it's a new startup.

It's only 18 months old. Peter Thielbacked, it's $4 billion in evaluation already. So my big question is the data question. There's so much data that financial giants, especially those that go back a long ways, have. That's unstructured. It's maybe unclear. Does this contain a social security number? Does this contain some other piece of maybe highly regulated information that we shouldn't feed into an AI?

Once you get an autonomous code or also working with that data, you could have whole software suites built based on data that maybe you don't want out there. So how much is that slowing down? I don't know about Goldman Sachs specifically, but the whole financial industry, in more quickly wrapping their arms around. I mean, I think, John, that highlights the rule of humans. And so, you know, you're going to have a case in which at every step of the way, there's going to be a human in control who has to own this. And I think this speaks to the future of work, which we talk about,

which is essentially we're going to go from individual contributors to essentially managers of AI agents. And so you're going to have to describe what you do, your job in discrete tasks in an abstract sense, describe it to talk to the AI, talk to the machine, and have them give you the result of that project, and you have to approve it. And so at the end of this, the day, there's still going to be human being in the loop

for the time being. And so I think that's really, that's the explainer for how this is going to be okay, at least in the intermediary. And what do they want this agent to do? They want it to write code? They want to write code. You know, there's a lot of technical debt

at these places, right? They're always going from Java 1 to Java 21, and it requires a lot of things that are considered drudgery by human beings. Well, you know, AI doesn't need vacations. They don't need weekends off. They can work 24-7. And so they're going to first unleash it on that.

Now, I think, you know, the force multiplier of this is if, you know, individual human being has two or three AI agents and it makes them that much more productive, you know, there are ramifications for employment levels, I would think. In the past, this is the sort of work that would be offshore, right? You try to, the kind of work where you've got some legacy system and you still need some work done in that, and you don't want to be hiring expensive people here to do that, but maybe there's an army of code or somewhere else who can. I think the expectation is that this is the kind of work AI might be able to do, but we see some firms, outsourcing firms, whatever, in India as well, and in China, embracing this AI technology thinking, hey, we do this work, maybe we can figure out how to make AI do it better.

Is the thought that this, you know, partnering with cognition, maybe U.S. firms, that work won't go to those firms, or is there still the chance that those firms over there end up doing it better for the financial industry? Well, I mean, I guess I wonder what the office. offshore guys are doing, using in terms of their, you know, the models, right? Are they using open AI models? Yeah, I don't know. I mean, I think, you know, for the bigs, we're talking Goldman, J.B. Morgan, Morgan, Stanley, these are the most aggressive. You know, just last year they were rolling out essentially chat GBT for Wall Street.

And now, you know, the story is today, there's the first, the agents have arrived on Wall Street, right? And these are autonomous, essential, you know, programs that can do work, entire tasks, and they were turning back to them and say, did I do it well? You know, I think this is a sign of what's the come, basically, John. If it works. I don't know. I think there's still, we were talking to Deirdre about this last hour, about how, in some of these cases, it's actually not making software developers more productive because they have to kind of look over the work.

And it's tedious to look over work. It's more fun to write code yourself. Like, if you're good at it, writing code is pretty fun, you know? If you're not, if you're just checking work or in this case, like you said, someone's still going to have to review all these things. So I'm very curious just how well this actually works. Well, I mean, again, you know, the word from, you know, the tech chief of Goldman Sachs who came from Amazon, AWS, is he believes they're on par with some of the best developers out there today. Oh, I'm sure they are. And this is early days yet.

Yeah. Oh, you mean the code that the AI agents are? The AI agent called Devon, which is, you know, which has, you know, blown some minds in terms. It has its own share of skeptics in the, in the programming community as well, as well, to point out, it's supposed to be excellent. It's the most autonomous. You know, there's GitHub as well. There's other agents who are basically helpers. And this is something that soup to nubbed.

nuts will actually, you know, do you want a website that has all your appearances on TV? You can create that for you. Right, which would be great. I love how it's Devin. Like, we like know these characters. You know, Devin, it'd be nice to learn more about you. Hugh, thanks very much. We appreciate it.

Hugh, son, you can read more over at CNBC.com. Now let's get over to Pippa Stevens for a CNBC news update. Pippa. Hey, John. Ukrainian president, Vodemir Zelensky said today that the U.S. has resumed sending military supplies to Ukraine. His comments come after the latest shipment was temporarily paused last week in a surprise move by the Pentagon that caught many in Washington off guard.

The son of notorious Mexican drug lord El Chapo pleading guilty to drug trafficking charges today in a Chicago federal courtroom. He and his brother are accused of running a faction of the Sinola cartel after their father's arrest and prosecution. Known as the Chapitos, the Justice Department says the brothers ran a massive effort to send huge quantities of fentanyl into the U.S. And Ford Motor Company has recorded more safety recalls in the first six months of the year than any other car company has ever issued in an entire year. According to a Wall Street Journal analysis of federal data, there have been 88 safety recalls so far. Ford tells the journal the volume of recalls reflects a strategy to quickly find and fix issues

and says it expects recalls to decline over time as a result of internal changes. John, I think this follows the recall yesterday of 850. 50,000 vehicles. Okay. Yeah, Pippa Stevens. Thank you. Well, coming up, talk about sea change. One start-ups, not only building non-toxic living sea walls, they're actually 3D printing them. And even Mark Cuban is buying into the technology.

We're going to get the full story in Power Lunch Returns. CryptoWatch is sponsored by Crypto.com. Crypto.com is America's premier crypto platform. Welcome back. Sea walls have long been used. used to protect coastal communities from sea level rise and high storm surges, and both of those become more dangerous new technology stepping up. Our Diana Oleg has the details in her continuing series on climate startups, Diana. ...themselves, at least the old kinds, are not very friendly to the environment. They leach

chemicals. Now, one startup is not only building non-toxic living seawalls, but they're actually 3D printing them. These seawalls from Miami-based kind designs are are made to mimic mangroves and other marine habitats. That's why the ripples in the concrete. So not only do they protect coastal communities from rising tides, they also create marine habitats that can sequester carbon. So it is not only a structural infrastructure product,

but it's also now able to function like a reef, dissipate 47% of the wave energy, and dramatically improve the quality of water. The seawalls are 3D printed, cutting construction time, dramatically. Kind designs uses a rapid-setting cement with a 32% lower CO2 footprint than traditional Portland cement. Its materials are non-metallic, making them non-toxic. And unlike the century-old flat seawalls that destroy marine habitats, these become living artificial reefs.

The idea is to attract native species, create caves for them to hide from predators, and essentially transform this infrastructure product into something that's now also functions like an artificial reef. As the sea life deposit their skeletons and shells, they sequester carbon through bio-calcification, about 40 pounds of carbon per panel per year. So each panel is equivalent to a tree. Coastal developers say their clients especially like that aspect. This checked a lot of boxes for us. It was more efficient in terms of the staging on the project site. We were able to do it for the same cost. Kind Designs. is backed by Florida Opportunity Fund, Anthropocene Ventures, Govo Ventures, Overlay Capital, and Mark Cuban

companies. Total VC funding to date, $11.5 million. The panels cost about the same as traditional panels, about $30 per square foot, and there is additional cost savings. Because traditional seawalls hurt the environment, many permitting agencies require often expensive offsets to mitigate the effects. Living sea walls don't need the offsets. Back to you guys. So, Diana, he said that they're faster to build from 3D printing as well. So is there any tradeoff? I mean, the amount of volume that they can get through the printer? Well, they can get a lot through. I mean, look, it takes about a full day to precast an original type, you know, the legacy seawalls, and then it takes a month to cure it. It takes about an hour to do one of these and just three days for it to cure. So that

means they can do a lot more volume, a lot faster, and they're also, you know, they're the same as the old style seawalls so any contractor can install them. All right. Diana, thanks. We appreciate it. For now, Diane Oleg. Still ahead, some names surprising to the upside. Our trader explains why now's the time to buy this equipment player who's been under pressure. It's our mystery chart. If you can guess it, send me a tweet. Three Stock Lunch is up after the break. Welcome back. It's time for Three Stock Lunch, where we hit three different stocks on the move, why they matter to you and what you should do with them. Here with our trades is FB Capital Partners Director of Research, Mike Bailey.

Mike, it's good to see you. We're going to home in on three names that you think will surprise to the upside this earnings season, always dangerous to step in front of that, so we appreciate you doing so. And let's start with Dana Hear, the life sciences company, big winner during the pandemic, struggled lately.

It's down 10% this year. You say they've got a strong track record of earnings beats and you want to own it here. Absolutely. So to your point, this has been a very strong performer over the years. It was sort of a, it's been a boom-bust company last few. COVID was great for them, sold a lot into diagnostics, testing equipment, and vaccines, etc. Very tough comparisons coming out of COVID. So they're just working through that. I think the issue with Danaher, and the reason I think it's a good name to own into earnings season,

is really fewer distractions could drive more earnings. So what do I mean by that? So the COVID kind of wave, they're mostly through that, but a lot of other things are going on. Usually, Dan Heard is a very good deal company. They've done a lot of good acquisitions. They've had a couple of misses, and that's really been weighing them down. China has really been squeezing them on pricing. That's sort of in middle-to-latter innings.

They're working through that. They've had a couple of other tough comparisons. So as they work through some of these issues along with tariffs, tariffs were very tricky in Q1. They're working through that as well. It does seem like they're going to sort of this game of whack-a-mole could be coming to an end, and they could have some good results in Q2. I'm just curious, what's the long-term impact of AI on an instrumentation company like that?

Is it something where they've got a ton of data from all these tests so it helps them, or does it lower a barrier to entry from somebody trying to use software to encroach? Yeah, that's a great question. I think at this point, it's unclear as to, you know, will AI create major winners or losers in some of the diagnostics? At this point, really, we've not seen any of the same. major changes to kind of the workflow, how doctors or scientists are using some of the stuff. It tends to be very using a lot of physical things, you know, blood samples and big heavy equipment. So I know Dan Her is certainly looking into it, but I think that type of change

to what Dan Heur's working on, that may be a few years out at this point. All right. Up next, flow. The progressive, Mike, you think, wait, are there some headwinds, or is this, you think this one still could and should be a winner throughout earnings season? This one is in a very good shape. So I'm sort of cutting corners here a little bit. So Progressive reports, monthly results. April and May were fantastic. So the real question by owning Progressive into this quarter is June. June could be another impressive quarter. So at this point, I think we're in pretty good shape. If you look back at the last two months, Wall Street only took up estimates basically in line with how good April was, how good May was. They really haven't

taken things up. So June doesn't look that aggressive. However, we could be looking at 60-70 percent earnings growth quarter over quarter out of a car insurance company that just almost boggles the mind. But that's where we're at. You know, this is a financial company. As they have these massive margin improvements, they continue to gain share, the cost of repairing your car keeps going up. All those things feed into this business. You're getting very nice growth in particular this quarter. All right, Mike, your last name today is Alphabet.

The Tech Giant reports July 23rd. one key item investors are going to be listening for is how Google plans to transfer advertising revenue from a traditional search over to AI-based search. There we are with AI again. Are you betting on Alphabet? Alphabet is in pretty good shape. I think of the three stocks, so this definitely is a little bit of a trick here. One, I think the theme in this quarter is all about competition, in particular AI competition. So certainly a lot of other companies are going after search. If you go back to Q1, I think Google and our Alphabet did okay. You look at paid clicks.

They slowed down a little bit, nothing terrible. So that really is the focus here. The other stuff at Alphabet is doing pretty well. YouTube is growing nicely. Google Cloud is doing pretty well. But looking at those paid clicks, that is very critical. Google's got their own kind of home-based or version of AI that they've made themselves. That's doing pretty well.

And so it is kind of a question, but I think given everything else at Alphabet that's working well. Margins have also been helping them out. I do think that's something that's going to push them over the finish line. If you look at the track record, very good job historically in terms of beating quarterly expectations. So we do see another good result coming up here in a few weeks. There is all this talk about AI companies launching browsers, but I'm thinking 15 plus years back, Google and a few others built, not just browsers, but email maps, all of these different services to create an ecosystem and sort of lock people in. So how much of a danger are these AI companies when they're not profitable yet? Definitely a risk factor. I mean, look at the history

of, frankly, every business model. You get a big, profitable company, lots of margins, lots of growth. Everybody's going after. That's what we're seeing here in search in particular. Again, I think the results are definitely inconclusive. We're seeing a slowdown for Google, but definitely not seeing a massive erosion of the market share. So, you know, I think it's a big target on their backs that folks are looking for. And really the next few quarters are going to be very critical in terms of can Google really shift advertisers over to their own version of AI? And frankly, taking a look at sentiment, we haven't talked about that a whole lot. Sentiment is terrible for alphabet.

So I think investors are expecting everything to go wrong. What if something goes right? Is that something that could be favorable? So I think going into the quarter, good track record of quarterly results, low expectations, that's a recipe for some pretty good results coming out of the quarter. All right. And that first stock, Dan O'Hur, was founded by an alum of my alma mater, DePaul University. Go Tigers. And Mike Bailey, thank you. Also, remember, you can recap every three-stock lunch. Anytime you want, scan that QR code on your screen right now, or head over to cnbc.com for more. Still ahead, call it a Hollywood ending. This mystery theater stock is on pace for a record year thanks to a summer rally here at the box office. We'll reveal the name. And as we head to break, be sure to follow and download the Power Lunch podcast. podcast on any platform you use. Catch audio versions of the show anytime you want. We'll be right back. Before we go, IMAX is headed for its best year on record as it capitalizes on Hollywood's box office rebound.

CEO Rich Gelfand is forecasting a $1.2 billion year at the box, global box office, which would be 33% higher than 2024 and would make it, again, its best year ever for the 55-year-old business. The company's already seen success with two summer block. The Blockbusters, the F1 movie, and Mission Impossible's IMAX screenings have accounted for more than 20% of all domestic ticket sales in the U.S. and Canada. Sinners did pretty well, too. And this is poised to be another big weekend for IMAX with Superman being released today. CEO Rich Gelfand is going to be on closing bell overtime coming up in the 4 p.m. hour. You'd never want to miss overtime, Kelly. Oh, no, obviously.

Who is the Superman studio? It's not, it's obviously, it's not a universal. Warner Brothers, yeah, D.C. There's big hope among comic book fans that this is a comeback for D.C. Marvel had just been dominating. Marvel's kind of falling off a little bit. This is like the third best rated DC film on Rotten Tomatoes behind the Batman begins, I think it was, or, you know, the one with Heath Ledger and Wonder Woman. I have read really good reviews of this.

And I think people are right. A lot of the family kind of movies are getting people back into theaters. I was even thinking, like, would this be one that we should? But I think it's PG-13. Yeah, it's a throwback to the Christopher Reeve-type imagining of this. Yeah, cool. All right, John, thanks for being here. Have a good show.

Over time. Got to watch it. As always, thanks for watching, PowerLet. Closing bell starts right now.